The Indian stock exchange will introduce a Closing Auction Session (CAS) for stocks with futures and options (F&O) contracts from Monday, August 3, which marks a big change in how closing prices are determined. Zerodha co-founder and CEO Nithin Kamath detailed the implications for traders and the brokerage industry in a post on X today.
What is the Closing Auction Session?
Currently, the closing price of a stock in India is calculated as the volume-weighted average price (VWAP) of trades during the last 30 minutes of continuous trading. Under the new CAS mechanism, buy and sell orders for eligible stocks will be collected during a dedicated auction period and matched at a single equilibrium price.
This practice aligns India with global standards, as major exchanges like the New York Stock Exchange (NYSE) and London Stock Exchange (LSE) already use similar closing auctions.
Will the market timings change for F&O segment?
The most significant change in trading operations occurs during the final few minutes of the trading session.
- Stocks with F&O contracts (CAS applicable): Continuous trading ends at 3:15 PM, followed by the auction session.
- Other stocks: Trading continues until 3:30 PM.
- Index and stock F&O contracts: Trading until 3:40 PM.
Meanwhile, trading in stock and index derivatives will continue for an additional 10 minutes, causing the market to close at 3:40 PM instead of 3:30 PM.
In the cash market, the post-close session will run from 3:50 PM to 4:00 PM, during which trades will be executed at the official closing price.
Other things to note down
According to regulatory intent and Zerodha’s explanation: Better price discovery: Pooling orders reduces the influence of individual large trades in the final minutes.
Reduced tracking error for passive funds: Index-tracking funds and ETFs can execute large orders more efficiently without moving prices during continuous trading.
Curb potential manipulation: Large orders near close have raised concerns about influencing index levels; a single equilibrium price makes this harder.
SEBI approved the framework earlier in 2026, with implementation set for August 3.
Impact on brokerages, including Zerodha
Nithin Kamath noted that while the change promotes market integrity, it will likely reduce brokerage revenue by an estimated 1–5 per cent as it may lower trading activity or volumes in the final minutes for affected stocks. He emphasised transparency, stating, “Now that broking is listed and people are looking more closely at the business, the honest bit…”
Kamath also highlighted an immediate operational challenge, educating customers about the different closing times across market segments. “We’re braced for the flood of questions,” he added.
Zerodha has published a detailed explainer on its Z-Connect blog for users.
Market participants expect the shift to benefit institutional investors and index funds while requiring retail traders to adapt their strategies, particularly around the end of the trading day.
(Disclaimer: The above article is meant for informational purposes only and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
Shahnaz writes on a wide range of topics, including business, social issues, politics, environment, lifestyle and gender. She has previously wrote long-form content covering a wide range of topics, including politics, policies, and more. Additionally, she monitored wires services, social media, and local news outlets for breaking news and relevant stories. Also, she honed her skills in short-form writing, delivering accurate and concise content in a time-bound manner, from breaking news to engaging updates and latest developments on the respective topics. She holds a PG Diploma in Media Studies: Film and Television, with a master’s degree in Journalism and Mass Communication: Research from the University of Calcutta. With over 5 years of experience in journalism, including ground reporting, desk, coordination and copywriting, she excels in both arenas – desk and field. She has covered the West Bengal Assembly Elections 2021 and Lok Sabha Elections 2019 and reported on several news stories from West Bengal. She has extensively covered the TMC beat from 2018 to 2021. Apart from work, Shahnaz likes cooking, watching movies and reading books. She also loves travelling.
