Explained: What is CAS and what do new stock market timings mean for BSE, NSE traders?

India's equity markets are set for one of their biggest operational changes in recent years.

Starting today, the Securities and Exchange Board of India (Sebi) and the National Stock Exchange (NSE) will introduce the Closing Auction Session (CAS) for eligible Futures & Options (F&O) stocks. The new framework changes how closing prices are determined for these stocks and extends equity derivatives trading by 10 minutes.

For investors, the biggest change is this: the closing price of eligible F&O stocks will no longer be calculated using trades executed during the final 30 minutes of the trading session. Instead, it will be discovered through a dedicated auction held after continuous trading ends.

What investors must know?

Presently, the closing price of a stock is calculated using the volume-weighted average price (VWAP) of all trades executed during the last 30 minutes of continuous trading. From today, that method will no longer apply to eligible F&O stocks.

Continuous trading in these stocks will end at 3:15 p.m. They will then move into a 20-minute Closing Auction Session, where buy and sell orders will be matched to determine a single closing price.

Simply put, CAS is a 20-minute auction that begins after continuous trading ends. Instead of executing every trade instantly as it happens during the trading day, all buy and sell orders are pooled together and matched at one common price. That single price becomes the stock's official closing price.

The change will initially apply only to stocks that have listed derivative contracts. All other stocks will continue with the existing 30-minute VWAP-based closing price mechanism, according to a Sebi circular.

Importantly, F&O stocks do not stop trading for the day at 3:15 p.m. Only continuous trading ends. Their official closing price is determined only after the auction concludes.

The change also means different parts of the market will now close at different times. Continuous trading in eligible F&O stocks will end at 3:15 p.m., followed by the auction until 3:35 p.m. Stocks outside the auction framework will continue trading until 3:30 p.m., while index and stock derivatives will remain open until 3:40 p.m.

Timing chronology starting 3:15 p.m.

The process begins before the auction starts. Between 3 p.m. and 3:15 p.m., exchanges will calculate the volume weighted average price (VWAP) of trades in every eligible stock. At 3:15 p.m., continuous trading in eligible stocks ends, and the market shifts into CAS.

For the next five minutes, until 3:20 p.m., no fresh orders can be placed as the market transitions into the auction. From 3:20 p.m. to 3:25 p.m., investors can place both market and limit orders.

From 3:20 p.m. to 3:25 p.m., investors can place both market and limit orders. Between 3:25 p.m. and 3:30 p.m., only limit orders can be entered. Market orders placed earlier cannot be modified or cancelled during this phase. To prevent a flurry of last-second orders, the order entry window will not close at a fixed time. Instead, it will shut randomly between 3:28 p.m. and 3:30 p.m.

Once the order entry window closes, exchanges will stop accepting orders and begin matching buy and sell orders between 3:30 p.m. and 3:35 p.m. All successful trades will be executed at a single equilibrium price, which will become the stock's official closing price.

How is the closing price decided?

The auction is designed to identify the price at which the largest number of shares can be traded. If more than one price results in the same trading volume, the system will choose the price with the smallest unmatched order quantity. If there is still a tie, the price closest to the reference price will be selected.

If no equilibrium price is discovered, the reference price itself will become the official closing price.

Why the tweak?

The objective is to make the closing price more representative of overall market demand and supply. By bringing together all buy and sell orders at the close, the auction is designed to improve liquidity, help execute large orders more efficiently and arrive at a more robust closing price.

The framework is also intended to make it harder for large trades placed in the final minutes of the session to disproportionately influence stock and index closing levels.

What should traders know?

The new framework also changes the trading day for intraday participants. For traders using the MIS intraday product, the auto square-off time for stocks covered by the Closing Auction Session will move to 3:10 p.m. For stocks outside the auction framework, the auto square-off time will remain 3:25 p.m. The auto square-off timing for index and stock derivatives will also continue to be 3:25 p.m.

Also read: Stock market closing time changes from today: What happens at 3:15, 3:30 and 3:40 PM

Futures and options themselves will not enter the Closing Auction Session. They will continue trading normally until 3:40 p.m., even though their underlying stocks will have already moved into the auction after 3:15 p.m.

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