Closing Auction Session (CAS): How the Closing Price Works From 3 August 2026

The one-minute version

Until 31 July 2026, a stock's closing price was an average. The exchange took every trade in the last thirty minutes and computed a volume-weighted average price (VWAP). That was the close.

From 3 August 2026, for stocks that have futures and options contracts, the closing price is instead an auction. Continuous trading in those stocks stops at 3:15 p.m. Everyone who wants to buy or sell at the close puts their orders into one pool. At 3:30 p.m. the exchange finds the single price at which the largest number of shares can change hands, and that price becomes the close. Everybody in the auction trades at that one price.

The old method asked what people actually paid over the last half hour. The new one asks what single price would clear the most shares if everyone who cares about the close turned up at the same moment.

The detail below matters more than it might sound, because some order types you are probably used to do not work in the auction at all.

This article is based on SEBI circular HO/47/11/11(3)2025-MRD-POD2/I/2765/2026 dated 16 January 2026, "Introduction of Closing Auction Session (CAS) in the Equity Cash Segment and certain modifications in the Pre-Open Auction Session". Paragraph numbers below refer to that circular.

Why SEBI changed it

The closing price is used to settle derivatives, to compute index levels and to strike mutual fund NAVs, so an unrepresentative close propagates a long way. SEBI's reasoning (para 2) is that an auction pools all closing interest into one moment of liquidity. That improves execution for large orders, gives every category of investor the same access to the close, and lets passive funds transact at the closing price with less tracking error.

Which stocks are affected

This is the first question to answer, because most stocks are not affected yet.

SEBI says CAS applies "in a phased manner", starting with stocks on which derivative contracts are available. Exchanges commonly label these two groups Category I and Category II, but that is exchange shorthand, not the regulation's language.

The timetable

CAS is a separate 20-minute session from 3:15 p.m. to 3:35 p.m., split into four parts (para 4.2.1):

Three timing details people miss:

1. The order window shuts at a random moment between 3:28 and 3:30 (para 4.2.2), decided by the system. You cannot plan to submit at 3:29:58.
2. Equity derivatives keep trading until 3:40 p.m. (para 4.2.3) - five minutes after the cash auction has finished.
3. The post-close session runs 3:50 p.m. to 4:00 p.m. (para 4.2.4), where trades execute at the discovered closing price.

The reference price, and the 3% band

Before the auction can run, the exchange needs an anchor. That anchor is the reference price: the VWAP of all trades in that stock between 3:00 p.m. and 3:15 p.m. (para 4.3.1).

If the stock did not trade at all in that window, there is a fallback chain (para 4.3.2):

1. The last traded price during the day, else
2. the previous trading day's closing price - adjusted, where a corporate action applies, to the adjustable closing price or base price.

Every order in CAS must be priced within +/- 3% of that reference price (para 4.4.1). An order outside the band does not participate.

For F&O traders there is a related change: between 3:15 p.m. and 3:40 p.m., stock futures price bands are aligned to the CAS band, and the usual dynamic flexing of futures price bands does not operate in that window (para 4.4.2).

What order types you can use - and what breaks

Allowed (para 4.5.1): limit orders and market orders. Both count towards discovering the equilibrium price.

Not allowed:

• Iceberg orders (para 4.5.2). Quantity must be disclosed in full.
• Stop loss orders (para 4.5.3).

And critically - what happens to the orders you already had resting in continuous trading? They are carried into CAS, except three kinds (para 4.8.1):

• stop loss orders,
• iceberg orders,
• any order priced outside the CAS band.

In plain terms, a stop loss you were relying on to protect an open position does not follow you into the closing auction. If stop losses are how you manage risk near the close, you no longer have that protection between 3:15 p.m. and 3:35 p.m., and you need to size the position accordingly before the auction starts.

Two rewards for having been early, though (para 4.8.2 and 4.8.3):

• A limit order carried over from continuous trading has higher time priority than one placed during CAS.
• But if you modify it during CAS, its time priority is reset. Amending a carried-over order costs you your place in the queue.

How the closing price is actually chosen

The equilibrium price is the price at which the maximum volume is executable (para 4.6.2). When more than one price qualifies, the circular gives an explicit tie-breaking ladder:

1. Maximum executable volume (para 4.6.2).
2. If tied - the price with the minimum unmatched quantity in absolute terms (para 4.6.3).
3. If still tied - the price closest to the reference price (para 4.6.4).
4. If the reference price is the mid-value of that pair of prices - the reference price itself becomes the closing price (para 4.6.5).
5. If no equilibrium price is discovered at all - the reference price becomes the closing price (para 4.6.6).

The practical consequence is that you fill at the equilibrium price rather than at your own limit price. If you bid 1,010 and the auction settles at 1,005, you buy at 1,005. In an auction your limit price sets the worst price you are willing to accept; it does not predict what you will pay.

Matching order is also fixed (para 4.7.1). Market orders are served first: market against market by time priority, then leftover market orders against limit orders by price-time priority, then limit against limit by price-time priority.

What you can see while it runs

Through the session the exchange publishes (para 4.12) the indicative equilibrium price, the indicative cumulative buy and sell quantity, the indicative imbalance quantity at the equilibrium price, the indicative imbalance arising from market orders, and an indicative index. Exchanges may publish more at their discretion.

The imbalance figures are the useful ones to watch. A large buy imbalance means more buying interest is queued than the current indicative price can absorb, so that price will tend to move up before matching.

Margins

Orders in CAS attract margin at the order level, with one exception: limit orders carried over from continuous trading do not - unless you modify them, at which point they do (para 4.11). The existing cash-market risk management framework continues to apply through CAS (para 4.10).

What changes for derivatives settlement

Because the underlying closing price is now computed differently, SEBI amended the settlement price rules (para 4.9.1):

• Index derivatives settle at the closing price of the underlying index on expiry day, with that index close derived from the closing prices of its constituents.
• Stock derivatives settle at a price computed by the clearing corporations as the volume-weighted average of the stock's closing prices across all stock exchanges.

Next: the pre-open session changes on 7 September 2026

The same circular rebuilds the morning auction to match (para 5, effective 7 September 2026 per para 6.2). The pre-open session stays 9:00 a.m. to 9:15 a.m., but its internals change:

As in CAS, market orders get execution priority over limit orders, and iceberg and stop loss orders are not permitted.

A practical checklist

• Know whether the stock you are trading has F&O contracts. If it does not, nothing in this article changes your day.
• Do not rely on a stop loss order to protect you between 3:15 p.m. and 3:35 p.m. It will not be there.
• If you want to trade at the close, get your order in during 3:20 - 3:25 while market orders are still accepted.
• Do not amend a carried-over limit order unless you have to. You will lose your time priority.
• Expect to fill at the equilibrium price, not your limit.
• Remember the derivatives segment is still open until 3:40 p.m.

Auction mechanics tend to cost people money through unexpected fills rather than obvious losses, which makes them easy to ignore until they matter. If you trade near the close and want to work through what should change in how you place orders, speak to the Parasram India desk.

This article explains market mechanics based on the SEBI circular cited above. It is educational content, not investment advice, and it does not recommend any security or strategy.