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Sebi proposes new CAS framework, two options for expiry-day settlement
The CAS framework was introduced in the equity cash segment of stock exchanges for stocks on which derivatives contracts are available, with effect from August 3, 2026, with the objective of facilitating efficient and transparent price discovery of the closing price of securities.
SEBI said the framework was preceded by two rounds of public consultation, on December 5, 2024 and August 22, 2025, along with discussions with stock exchanges, broker associations, institutional investors, market participants and other stakeholders.
Before CAS was introduced, the closing price of stocks was determined based on the Volume Weighted Average Price (VWAP) of trades executed during the last 30 minutes of the Continuous Trading Session (CTS). Under CAS, the closing price is determined through an equilibrium price discovery mechanism based on the aggregate of buy and sell orders in the order book during the auction.
SEBI said the initial experience with CAS and feedback from stakeholders had highlighted the need to review certain aspects of CAS and the settlement methodology for derivatives.
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“The initial experience with CAS and feedback received from various stakeholders and market participants have accordingly highlighted the need to review a few aspects related to CAS and settlement methodology for derivatives,” SEBI said.
The consultation paper seeks comments on the methodology for determining derivatives settlement prices, the relative timing and duration of CTS, CAS and derivatives trading, and certain operational aspects of CAS and information dissemination.
Derivatives activity around the closing period
SEBI said derivatives trading activity continued to remain significant during the period immediately preceding and around CAS, including during the transition period between the cessation of CTS and commencement of the order-entry phase of CAS.
The consultation paper compares the premium traded in expiring benchmark index options on expiry days during the pre-CAS period from February 2026 to July 2026, covering 26 expiries, with the post-CAS period from August 3 to September 3, 2026, covering five expiries.
During the pre-CAS period, the average premium traded per minute between 3:00 PM and 3:30 PM was ₹126.31 crore on NSE and ₹141.48 crore on BSE.
During the post-CAS period, the average premium traded per minute between 3:20 PM and 3:30 PM, the CAS period, was ₹189.82 crore on NSE and ₹288.94 crore on BSE.
SEBI said the data indicated that derivatives activity remained concentrated towards the close of the trading session.
“The period relevant for determining the settlement prices under CAS is much shorter than the comparable pre-CAS period,” SEBI said.
Activity was also observed during the five-minute transition period. Average premium turnover during the transition period represented 1.72% of the day’s premium turnover on NSE and 1.57% on BSE.
The average amount of premium traded on an expiry day during the five-minute transition period was ₹791.50 crore on NSE and ₹668.38 crore on BSE.
SEBI said this concentration of derivatives activity towards the end of the trading session assumes particular significance on expiry days because the underlying securities are either approaching or undergoing their closing price discovery process while derivatives contracts continue to trade.
Two options for derivatives settlement
SEBI has proposed two options for reviewing the settlement methodology for both index and stock derivatives contracts on expiry days.
Option 1: Blended VWAP
Under Option 1, the settlement price on the expiry day of both index derivatives and stock derivatives would be based on trades executed during the last 30 minutes of CTS and 10 minutes of CAS.
SEBI has referred to this as the “Blended VWAP”.
For index derivatives, the relative contribution of transactions executed during CTS and CAS would be determined based on the actual traded value during the respective periods.
“No separate or predetermined weight would be assigned to CTS or CAS to determine the settlement price of derivatives contracts,” SEBI said.
For stock derivatives, the blended price would be determined on the basis of VWAP across exchanges, considering the actual traded value during the last 30 minutes of CTS and the 10 minutes of CAS.
SEBI said the proposed framework would incorporate actual transactions from both periods and allow their relative contribution to emerge from actual market activity.
In an illustration provided in the consultation paper, total traded value during the relevant period is ₹10,000 crore, comprising ₹9,000 crore during the last 30 minutes of CTS and ₹1,000 crore during CAS. CAS therefore accounts for 10% of the total traded value in the illustration.
SEBI clarified that no separate or predetermined 10% weight would be assigned to CAS.
Option 2: CTS VWAP
Under Option 2, the expiry-day settlement price for both index derivatives and single-stock derivatives would comprise only trades executed during the last 30 minutes of CTS.
This would represent the settlement methodology applicable before the implementation of CAS.
Transactions executed during CAS would not form part of the settlement calculation during the interim period.
SEBI has proposed that, following a sufficient period of experience with CAS, the settlement price for derivatives contracts on expiry day may be transitioned to include transactions executed during both the last 30 minutes of CTS and 10 minutes of CAS, as contemplated under Option 1.
Any such transition would be considered only after a period of not less than one year from the commencement of the revised settlement methodology.
SEBI said the transition would not be automatic after one year and would be considered based on the experience and evidence available at that stage, including whether sufficient liquidity and participation had developed in CAS, whether market participants had gained familiarity with the auction mechanism and how CAS functioned across different market conditions.
IEP and IIV during CAS
The consultation paper also examines the distinction between the Indicative Equilibrium Price (IEP), the final closing price determined at the end of CAS and the settlement price of derivatives contracts.
SEBI said the IEP during CAS is different from an executed traded price during CTS.
During CTS, compatible buy and sell orders are matched and a transaction is executed at the corresponding price.
During CAS, buy and sell orders are accumulated in the auction book and the exchange calculates the price at which the maximum possible quantity could currently be executed under the auction methodology.
As further orders are entered or existing orders are modified or cancelled, the IEP may change.
“The IEP is therefore indicative and evolving during CAS and does not denote a price at which transactions have taken place,” SEBI said.
The final CAS price is the price at which transactions are executed pursuant to the auction.
SEBI has also examined the Indicative Index Value (IIV) during CAS. The index itself is not subject to an auction. Its indicative value during CAS is derived from the continuously evolving IEPs of its constituent securities.
The final value of the index is established only after the auction concludes and the final prices of the relevant constituent securities have been determined.
SEBI said movement in the IEP-derived IIV during CAS should not be interpreted as the index having actually reached the corresponding level.
For instance, if an index has a pre-CAS value of 50,000 and the IIV during CAS is displayed at 48,500 points, this does not mean the index has actually traded or reached 48,500 points.
SEBI said such values “may be misconstrued by market participants as actual levels reached by the index”.
The consultation paper therefore proposes continuing dissemination of security-level IEPs while stopping dissemination of the IEP-derived IIV during CAS.
Market timing options
SEBI has proposed two alternatives for the relative timing of CTS, CAS and derivatives trading.
Under Option A, CTS for CAS stocks would continue until 3:30 PM, CAS would run from 3:31 PM to 3:40 PM and F&O trading would continue until 3:45 PM.
Under Option B, CTS for CAS stocks would continue until 3:15 PM, CAS would run from 3:15 PM to 3:25 PM and F&O trading would end at 3:30 PM.
SEBI has also proposed reducing the transition period between CTS and CAS from five minutes to up to one minute.
The post-CAS F&O trading window would be reduced from 10 minutes to five minutes.
CAS orders and Iceberg orders
The existing ±3% price band for CAS would continue under the proposal.
However, orders placed beyond ±1% of the reference price would not be permitted to be cancelled during CAS. Only price-improving modifications would be permitted.
SEBI has also proposed that unexecuted Iceberg quantities at the end of CTS could be converted into normal limit orders.
The entire pending quantity would then be disclosed in the CAS order book.
Public comments invited
SEBI said the consultation paper seeks to provide greater clarity regarding the distinction between the IEP emerging during CAS, the final closing price determined at the conclusion of CAS and the settlement price of derivatives contracts determined under the proposed settlement methodology.
The regulator has invited public comments, views and suggestions on the proposals. Comments may be submitted to SEBI until October 3, 2026.
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