The Securities and Exchange Board of India (SEBI) has revised the framework for the Clearing and Settlement (CAS) mechanism, introducing changes to the auction window and the calculation of reference prices for eligible securities.
In a late-night circular on Thursday, SEBI said that the closing price will be calculated based on a 30-minute volume-weighted average price (VWAP) on derivatives expiry days i.e. Tuesday and Thursday.
In September, the regulator proposed two options for calculating settlement prices for index and single-stock derivatives on expiry days: a blended VWAP based on trades executed during the final 30 minutes of the Continuous Trading Session (CTS) and the 10-minute Closing Auction Session (CAS), or retaining the existing method based solely on the final 30 minutes of CTS trading.
Closing auction session to feature system-driven random closure
The Closing Auction Session (CAS) will operate as a separate 10-minute session from 3:30 p.m. to 3:40 p.m. on all trading days. The order-entry window will close at a randomly determined time, with the closure controlled by the system.
Once order entry ends, stock exchanges will match orders in accordance with the CAS framework. The closing price determined through the auction, along with the quantity of securities traded, will be disseminated to market participants as soon as practicable after order matching is completed.
Revised trading timings for index and stock derivatives
Trading in index derivatives contracts will continue until 3:45 p.m. on regular trading days. However, on expiry days, trading in expiring index derivatives contracts will end at 3:30 p.m. Stock derivatives contracts, meanwhile, will remain open for trading until 3:45 p.m. on all trading days, including expiry days.
CAS framework to apply during special trading sessions
The closing prices of securities covered by CAS will also be determined through the auction mechanism during special trading sessions conducted by stock exchanges. The duration of CAS during these sessions will remain the same as that prescribed for regular trading days. The derivatives segment will close five minutes after the auction ends, followed by a 10-minute post-close session that will begin five minutes after the derivatives segment closes.
How the reference price for CAS will be calculated
The reference price of a security for the Closing Auction Session (CAS) in the cash market will be determined using the Volume Weighted Average Price (VWAP) of trades executed during the final 15 minutes of the Continuous Trading Session (CTS).
If no trades are executed in a security during the final 15 minutes of the CTS, its Last Traded Price (LTP) for that trading day will be used as the reference price for CAS. If the security has not been traded at all during the day, its closing price from the previous trading day will be considered the reference price. In the event of a corporate action, the previous day’s adjustable closing price or base price will be used instead.
