The SEBI Closing Auction Session framework is currently under review following feedback from market participants, with the regulator convening a meeting of its Secondary Market Advisory Committee (SMAC) on Thursday to discuss proposed changes.
The Securities and Exchange Board of India (SEBI) received around 20,000 comments on its consultation paper by the October 3 deadline. Beyond reviewing stakeholder feedback on its proposals, the regulator has not shared a detailed agenda for the meeting.
Key Points Of The SEBI Closing Auction Session
- SEBI introduced the Closing Auction Session for stocks with futures and options contracts on August 3, 2026.
- The consultation paper received around 20,000 comments by the October 3 deadline.
- Average daily turnover in the F&O segment fell to ₹193.34 lakh crore in August 2026, recovered to ₹226.06 lakh crore in September, and reached ₹275.77 lakh crore in October 2026.
- Market participants have largely favoured retaining the previous methodology based on the volume-weighted average price (VWAP) for at least one year.
Market Feedback And Derivatives Settlement
Market participants have largely favoured retaining the previous methodology for calculating derivatives settlement prices on expiry day. This older system was based on the volume-weighted average price of trades executed during the final 30 minutes of the continuous trading session, rather than immediately adopting a blended approach that incorporates data from both continuous trading and the Closing Auction Session.
SEBI introduced the auction-based mechanism to improve the closing price discovery process by matching buy and sell orders to arrive at a single equilibrium price. Closing prices play a critical role in derivatives settlement, index calculations, and the determination of mutual fund net asset values.
Turnover Trends In The Futures And Options Segment
The market was initially unprepared for the new mechanism, which shifted trading activity toward the auction window. As a result, the average daily turnover in the futures and options segment fell to ₹193.34 lakh crore in August 2026, down from ₹277.84 lakh crore in June and ₹214.30 lakh crore in July.
Trading activity rebounded after SEBI indicated that it would reconsider the methodology. Average daily turnover rose to ₹226.06 lakh crore in September and further to ₹275.77 lakh crore in October 2026. Following this initial experience, SEBI decided to review the methodology for determining settlement prices, market timings, and other operational aspects of the auction process.
Regulator Alternatives And Future Steps
The markets regulator has proposed two alternatives. The first option is a blended volume-weighted average price that incorporates trades executed during both the final 30 minutes of the continuous trading session and the subsequent 10-minute Closing Auction Session, with traded value across both periods factored into the calculation.
The second option is to retain the existing volume-weighted average price methodology for at least one year before considering a transition to the blended approach following a review. Market participants have largely supported the latter option. The consultation paper also sought feedback on alternative market timings, the dissemination of indicative index values during the auction session, and certain order-handling rules, with SEBI set to make a final decision following an evaluation of stakeholder responses.
Frequently Asked Questions
When was the SEBI Closing Auction Session introduced?
The Securities and Exchange Board of India introduced the Closing Auction Session for stocks with futures and options contracts on August 3, 2026.
What alternatives did SEBI propose for the settlement methodology?
The Securities and Exchange Board of India proposed two alternatives: a blended volume-weighted average price incorporating trades from both continuous trading and the auction session, or retaining the existing volume-weighted average price methodology for at least one year.
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