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 workThe 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.ALSO READ: Stocks vs Gold: Which asset could create more wealth in the Samvat 2083?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 methodologyFor 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 CASThe 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…