India’s markets regulator is unlikely to review the newly implemented Closing Auction System (CAS), as per Reuters. As per the international news agency, SEBI, the market regulator, “doesn’t see any flaw in it or its design,” Reuters reported, citing sources.
The issue comes to the fore after the CAS was implemented starting August 3. The Benchmark Nifty 50, experienced sharp spike in closing trade for the past two days. “It’s too early to do any review. Participation increased on Tuesday and the Securities and Exchange Board of India expects participation to increase further,” as per sources quoted by Reuters.
Reuters also stated that SEBI did not immediately respond to an email seeking comment. Financialexpress.com has also sent an email to SEBI seeking clarification, and we will update as soon as we hear from the market regulator.
What is CAS?
Under the new mechanism, the closing session is split into different parts. It starts with a five-minute transition to calculate a “reference price” based on recent trades. Then, investors can place both limit and market orders during this five-minute window soon after.Traders can place market and limit orders initially, but the final stage of the entry period is restricted to limit orders only.
To prevent anyone from trying to manipulate the closing moments, the session ends at a random time between 3:28 PM and 3:30 PM.
This system closes randomly. The price is determined naturally based on an equilibrium mechanism, the price at which the most shares can be sold.
Market Timings for Closing Auction Session (CAS)
| Time Window | Phase | Description |
| 3:00 pm – 3:15 pm | Reference Period | The VWAP of trades during this time determines the reference price for the CAS. |
| 3:15 pm – 3:20 pm | Transition Phase | Five minutes dedicated to reference price calculation and transitioning from Continuous Trading (CTS) to CAS. |
| 3:20 pm – 3:25 pm | Order Entry (All) | Investors can place both limit and market orders during this five-minute window. |
| 3:25 pm – 3:30 pm | Order Entry (Limit) | Only limit orders are allowed; market orders cannot be modified or cancelled during this phase. |
| 3:28 pm – 3:30 pm | Random Close | A system-driven random closure occurs anytime within these two minutes to end the order entry session. |
| Post-Random Close | Order Matching | Order matching takes place immediately following the random closure based on the equilibrium price. |
| 3:15 pm – 3:35 pm | Total CAS Duration | The overall time allocated for the separate CAS session on all trading days. |
| Up to 3:40 pm | Derivatives Window | The equity derivatives segment continues to operate until this time to align with the CAS price bands. |