SEBI’s latest circular, issued on September 12 2026, trims the closing auction to a 10‑minute block from 3:30 pm to 3:40 pm, with a system‑driven random closure between 3:38 and 3:40 pm—marking a 10‑minute contraction from the previous 20‑minute span.
The auction is now split into three stages: the first minute calculates the reference price and transitions orders; minutes 2–6 accept market and limit orders; minutes 7–10 allow only limit orders before the random shut‑down.
For stocks, the reference price derives from the volume‑weighted average price (VWAP) of the last 15 minutes of continuous trading; if no trades occur, the day’s last traded price or, absent that, the prior session’s close adjusted for corporate actions, will be used.
Derivatives trading rules shift slightly: index derivatives trade until 3:45 pm on regular days but stop at 3:30 pm on expiry days, while stock derivatives remain open until 3:45 pm even on expiry days. Settlement prices for index derivatives will now be the VWAP of the underlying index over the final 30 minutes of continuous trading, whereas stock derivatives will settle at the VWAP of the underlying stock across all exchanges.
Unexecuted limit orders at the close of continuous trading will be carried into the auction except for stop‑losses and orders outside the price bands; iceberg orders become fully disclosed limit orders unless the trader opts out. These converted orders receive lower time priority than native auction orders, but higher than those placed during the auction itself. The rule change for unexecuted orders takes effect on February 8, 2027, and exchanges must revise operating procedures within seven days of the circular.
The regulatory tweak is expected to tighten liquidity, reduce price impact, and improve the accuracy of closing price discovery, potentially benefiting index and option traders who rely on precise settlement values. Market participants will monitor the first few trading sessions after December 7 to gauge the new auction dynamics.