NSE overhauls closing price discovery, changes F&O expiry settlement rules from December 7

The National Stock Exchange (NSE) has announced a revised framework for the Closing Auction Session (CAS) in the equity cash segment and changes to trading modalities in the equity derivatives segment, with the new rules set to come into effect from December 7, 2026.

In two separate circulars issued on November 6, the exchange has detailed changes to the closing price discovery mechanism for eligible equity securities, trading hours for stock and index derivatives, futures price bands and the calculation of final settlement prices of expiring derivatives contracts.

The changes follow the Securities and Exchange Board of India's (SEBI) October 15, 2026, circular reviewing certain aspects of the closing auction session, market timings and settlement methodology for derivatives contracts.


While most of the revised provisions will take effect from December 7, 2026, changes relating to the treatment of unexecuted limit and disclosed quantity orders from the continuous trading session will be implemented separately from February 8, 2027, according to the NSE's accompanying FAQs.

Under the revised framework, the Closing Auction Session will be conducted for 10 minutes, from 3:30 pm to 3:40 pm on all trading days.

The NSE has also extended trading in the equity derivatives segment until 3:45 pm. While stock derivatives will trade until 3:45 pm on all trading days, including expiry days, trading in index derivatives contracts expiring on a particular day will end at 3:30 pm. Other index derivatives contracts will continue trading until 3:45 pm.

How the revised closing auction session will work

The 10-minute CAS will begin at 3:30 pm, with the first minute reserved for calculating the reference price and transitioning from the Continuous Trading Session (CTS).

Between 3:31 pm and 3:36 pm, members will be allowed to enter, modify and cancel both market and limit orders. From 3:36 pm until 3:40 pm, only limit orders will be permitted. Market orders cannot be modified or cancelled during this period, and the order-entry window will close randomly during the final two minutes.

Order matching and trade confirmation will take place between 3:40 pm and 3:45 pm, followed by a transition period until 3:50 pm. The post-close session will run from 3:50 pm to 4 pm.

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The closing auction mechanism will apply to securities on which derivative contracts are available on at least one stock exchange, subject to specified exceptions.

CAS will not be conducted for an otherwise eligible security on the ex-date of a scheme of arrangement if its price is not determined during the special pre-open session. It will also not be conducted if an index circuit breaker is triggered and trading is halted for the remainder of the day.

Reference price and closing price methodology

For securities eligible for CAS, the reference price will be calculated using the volume-weighted average price (VWAP) of trades executed between 3:15 pm and 3:30 pm.

If no trades take place during this period, the last traded price (LTP) of the security during the day will be used. If the security has not traded during the day, the previous trading day's closing price, adjusted for corporate actions wherever applicable, will serve as the reference price.

The price band during CAS will be set at 3% above or below the reference price.

The closing price of eligible securities will be determined through the equilibrium price discovered during the auction. If an equilibrium price is not discovered, the reference price will be considered the closing price. If the security has not traded during the day and no equilibrium price is discovered, the latest available closing price will be considered.

The exchange has specified that the equilibrium price will be determined based on demand and supply, with priority given to the price at which the maximum volume can be executed. If multiple prices meet this criterion, the price with the minimum order imbalance will be selected. If the imbalance is also the same, the price closest to the reference price will be considered.

The existing closing price methodology will continue for securities that are not eligible for CAS. If trading is halted for the remainder of the day following an index circuit breaker trigger, CAS will not be conducted and closing prices will be calculated using the existing methodology.

Unexecuted orders and restrictions during CAS

The exchange has specified that only market and limit orders will be allowed during the closing auction session. Stop-loss, immediate-or-cancel (IOC) and disclosed quantity orders will not be permitted.

Eligible unexecuted limit orders from the continuous trading session will be carried forward to CAS, subject to the revised price band and other applicable conditions. Such orders will retain their original timestamps and receive higher time priority than limit orders entered during CAS.

However, stop-loss orders, iceberg or disclosed quantity orders and orders priced outside the applicable CAS price band will not be carried forward.

Market orders will be accepted only between 3:31 pm and 3:36 pm. Once the restriction period begins, new market orders will be rejected, while modification and cancellation of existing market orders will not be permitted.

During the auction matching process, market orders will receive priority over limit orders. Eligible market orders will first be matched with other market orders based on time priority, followed by matching of residual market orders with limit orders on a price-time priority basis.

Any orders remaining unexecuted after the auction matching phase will be cancelled by the exchange. Trades executed during CAS cannot be cancelled.

The revised treatment of unexecuted limit and disclosed quantity orders from the continuous trading session will take effect from February 8, 2027, according to the NSE FAQs.

Futures price bands to be reset at 3:30 pm

The NSE has aligned the price bands for stock and index futures with the revised closing auction framework.

Between 3:30 pm and 3:45 pm, the price bands for stock and index futures will be set at 3% above or below their respective reference prices. The reference price will be based on the VWAP of trades in the respective futures contracts between 3:15 pm and 3:30 pm.

If no trades take place during this period, the last traded price of the contract during the day will be used.

In the absence of any trades during the day, the theoretical price of the stock futures contract, based on the underlying stock's cash-market price at 3:30 pm, will be considered. For index futures, the theoretical price will be based on the latest available underlying index value at 3:30 pm.

If the underlying price is unavailable, the base price of the respective stock or index futures contract will be used as the reference price.

The exchange has clarified that the reference prices for the cash and futures segments will be calculated independently and may differ, even though the applicable price bands will be aligned at 3%.

The existing framework for dynamic flexing of price bands for stock and index futures will not apply between 3:30 pm and 3:45 pm.

Outstanding orders outside the revised price bands will be cancelled. However, the exchange said the application of revised price bands and cancellation of such orders would take place sequentially and would not necessarily be completed instantaneously at 3:30 pm.

The Limit Price Protection (LPP) ranges for stock and index futures will also be recalibrated using the revised reference prices. There will be no change in the existing methodology for options price bands or LPP ranges during trading hours, including the period corresponding to CAS.

Derivatives trading hours and expiry-day changes

Under the revised schedule, normal market trading in both stock and index derivatives will begin at 9:15 am.

Stock derivatives will trade until 3:45 pm on all trading days, including expiry days. Index derivatives will also trade until 3:45 pm on regular trading days. However, contracts expiring on a particular day will stop trading at 3:30 pm on their expiry day.

The trade modification window for both stock and index derivatives will remain open until 4:15 pm.

The pre-open session for single-stock and index derivatives futures will continue to open at 9 am and close at 9:10 am, with a system-driven random closure during the final two minutes.

Expiry settlement prices to be based on 3 pm–3:30 pm VWAP

The NSE has also revised the methodology for calculating final settlement prices of expiring stock and index derivatives contracts.

For expiring index derivatives, the settlement price will be based on the underlying index value calculated using the VWAP of its constituent securities during the final 30 minutes of the continuous trading session in the equity cash segment, from 3 pm to 3:30 pm.

For expiring stock derivatives, the final settlement price will be determined by clearing corporations using the VWAP of the underlying stock during the same 30-minute period across all stock exchanges.

The change in expiry settlement methodology is separate from the daily closing price calculation for derivatives contracts. The exchange has clarified that the existing daily closing price mechanism will continue, with the last half-hour VWAP calculation period revised to 3:15 pm–3:45 pm.

API updates and mock trading

The NSE has revised the dissemination schedule for reference prices and price bands in the equity derivatives segment.

Reference prices for futures contracts, which are currently disseminated from 3:15 pm onwards, will be disseminated from 3:30 pm onwards. The dissemination of upper and lower price bands will also shift from 3:15 pm to 3:30 pm onwards.

The exchange said the functional changes arising from the revised framework would be made available for testing during mock trading sessions. Separate circulars will be issued regarding these sessions.

Members have also been advised to load the updated contract.gz and NSE_FO_contract_ddmmyyyy.csv.gz files in their trading applications before trading on the effective date of December 7, 2026. The files are available through the exchange's Extranet server and its website.

Disclosure: This article has been written by Kumar Gaurav, who is not a Sebi-registered Research Analyst or an Investment Adviser. Gaurav and their ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective Sebi-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here