India's stock exchanges will implement a new Closing Auction Session (CAS) for eligible Futures and Options (F&O) stocks starting August 3, replacing the current volume-weighted average price (VWAP) mechanism for determining official closing prices.
The Securities and Exchange Board of India (SEBI) introduced the change to enhance price discovery and reduce the risk of manipulation during the final minutes of trading.
Under the previous system, closing prices were derived from the average of trades executed in the last 30 minutes, a method that sometimes failed to reflect true market equilibrium and left prices vulnerable to last-minute volatility.
The new auction model will allow investors to submit orders during a designated window before the market closes, with a single clearing price determined by the maximum volume that can be matched.
This approach aligns Indian markets with global best practices, where closing auctions are standard for major indices and derivatives.
The reform is expected to benefit institutional investors and algorithmic traders who rely on stable closing prices for portfolio rebalancing and index fund tracking.