SEBI Proposes Game-Changing Revised Closing Auction Session to Set Final Stock Prices

India's markets regulator just dropped a bombshell proposal that could reshape how billions get priced at closing bell.

The New Closing Playbook

SEBI's pushing for a complete overhaul of the final auction mechanism—aiming to curb volatility and prevent those suspicious last-minute price swings that always seem to benefit someone. Because nothing says 'efficient markets' like needing regulatory intervention to stop traders from gaming the closing bell.

Final numbers will now get determined through an extended, more transparent auction process that supposedly reflects true supply and demand. We'll believe it when we see it—after all, finance has always excelled at finding new loopholes faster than regulators can patch old ones.

20-mte session

Under the revised plan, the closing auction is expected to be a 20-minute session from 3.15 to 3.35 pm, instead of the originally proposed 3.30 to 3.45 pm. This will see four sub-sessions for order entry, matching, and confirmation.

The price band during the order input and random closing session has also been suggested to be narrowed to ±3 per cent from the reference price instead of ±5 per cent proposed earlier.

With the change in timings of CAS, the time period for calculating the reference price based on VWAP has also been cut to 15 minutes from the current 30-minute window. Accordingly, the reference price is suggested to be based on the VWAP of the last 15 minutes from 3:00-3;15 pm of the continuous trading session (CTS).

Index rebalancing

With CAS, the regulator aims to reduce volatility, particularly during index rebalancing and derivatives expiry, and bring India’s closing price mechanism in line with global markets. SEBI has invited public feedback by September 12.

The consultation paper has also proposed permitting passive mutual funds to undertake overnight borrowing to meet the liquidity requirements arising out of any net negative cash balances on account of the trades undertaken in CAS.

The draft paper noted that passive investments through MFs and FPIs has seen significant growth with assets under management close to ₹30 lakh crore at the end of July.

For NAV stability

CAS provided a more stable and less volatile closing price compared to the volatility often observed under VWAP based closing price methodology, where large institutional trades executed towards the end of the VWAP calculation window, could create sharp intraday price swings as the market absorbed these flows in real time.

Under the revised proposal CAS WOULD be applicable only to the stocks that are available for trading in derivative segment, and then based on the experience gained may be extended to all stocks at a later stage.

Published on August 22, 2025