SEBI has stepped back from its controversial decision that rattled the market for months and kept both professional and retail traders away.
In a circular dated October 15, 2026, on the Closing Auction Session (CAS), the regulator kept the auction, but cut its link to expiry-day settlement. From December 7, the session will run for 10 minutes, from 3.30 pm to 3.40 pm, on every trading day. Index derivatives expiring will stop trading at 3.30 pm. Stock derivatives will trade until 3.45 pm, and the cash market's post-close session will run from 3.50 pm to 4 pm at the closing price.
Expiring index contracts will now settle on an index value based on the volume-weighted average prices (VWAP) of their constituents during the last 30 minutes of continuous trading. Expiring stock derivatives will settle on the underlying stock's VWAP over the same window across all exchanges. The auction price will no longer decide who wins or loses on expiry.
This is a U-turn from what the regulator proposed earlier. The January 16 circular tied settlement to the auction close, and the auction for stocks with derivative contracts began on August 3. SEBI had argued earlier that its data showed the auction gave "a more stable and less volatile closing price" than a VWAP close.
Chandan Taparia, head of derivatives and technical research at Motilal Oswal Financial Services, said it had become hard to write options and hold positions to the close because index prices could swing "by around 1 percent due to CAS". He also said volumes on expiry days had fallen.