SEBI Chairman Tuhin Kanta Pandey has affirmed that the new Closing Auction Session, launched on August 3, 2026, will continue as a permanent fixture. Designed to standardize closing prices, the system is showing improved mutual fund participation. The regulator is now preparing reforms to the securities lending and borrowing mechanism to further stabilize the session for market participants.
SEBI Chairman Tuhin Kanta Pandey has confirmed that the new Closing Auction Session (CAS) for F&O-eligible stocks is here to stay. Introduced on August 3, 2026, the mechanism represents a significant shift in how the final closing price of a stock is determined. The regulator intends for this system to remain the standard, despite feedback from some market participants requesting modifications to the current process.
Transition from Traditional Pricing
For many years, the Indian stock market determined closing prices using a volume-weighted average price (VWAP) method. The introduction of the CAS moves the market to a single execution price. This change is intended to assist passive investors and foreign portfolio investors, who require a single, accurate price to execute their trades at the end of the day. The regulator noted that initial challenges were largely due to industry inertia, as market participants needed time to update internal systems built around the older VWAP model.
Participation and Market Integrity
Data indicates that the market is slowly adapting to the new system. Mutual fund participation in the closing auction has shown a steady increase, climbing from approximately 5-6% on the first day to between 20-25% more recently. Regarding concerns about potential market manipulation, SEBI has reviewed the available data and found no evidence to suggest the system is being manipulated. The regulator observed that price discrepancies, which were noticed immediately after the rollout, have narrowed as market participants have gained experience with the auction process.
Upcoming SLBM Reforms
To improve the effectiveness of the closing auction, SEBI is now focusing on the Securities Lending and Borrowing Mechanism (SLBM). The regulator plans to release a consultation paper on this soon. The objective is to encourage greater participation in the lending and borrowing of shares. An improved SLBM environment is expected to support the closing auction by providing better liquidity and enabling more investors to participate.
Investor Monitorables
For investors, the primary area of focus during this transition remains liquidity. In the early phases of the new session, thin liquidity has sometimes led to wider bid-ask spreads, which can impact the cost of trading at the close. While the system is now permanent, the market continues to adjust. Investors may monitor how volumes and spreads evolve in the coming weeks, as well as the details of the upcoming consultation paper on SLBM reforms, as these will likely influence how the closing session functions in the long term.