The National Stock Exchange (NSE) will introduce a new method for closing price discovery through the Closing Auction Session (CAS) from tomorrow, according to News on AIR. The mechanism will change how closing prices are determined for eligible Futures & Options (F&O) stocks in the cash market, with the aim of improving price discovery and aligning Indian markets with global practices.
Trading schedule changes across segments
Under the new framework, trading hours will vary by market segment, News on AIR reported. Non-F&O stocks will continue regular trading until 3:30 pm, with no change to their trading schedule. Stocks included in the F&O segment will see continuous trading until 3:15 pm, followed by the Closing Auction Session from 3:15 pm to 3:35 pm. Stock and index F&O trading will continue until 3:40 pm.
| Market segment | Trading schedule | Closing time |
|---|---|---|
| Non-F&O stocks (cash market) | Regular trading, unchanged | 3:30 pm |
| F&O stocks (cash market) | Continuous trading until 3:15 pm, then Closing Auction Session (3:15 pm – 3:35 pm) | Determined by auction after 3:35 pm |
| Stock and index F&O derivatives | Extended continuous trading | 3:40 pm |
This move will extend equity derivatives trading by 10 minutes, resulting in different closing times across market segments, the report said.
Objective: Better price discovery and global alignment
The NSE's announced objectives for introducing the Closing Auction Session include improving price discovery, aligning Indian markets with global practices, and creating a smoother link between the cash and derivatives markets, according to News on AIR. The extension of F&O trading hours is aimed at enhancing efficiency and improving the accuracy of closing price determination.
Replacing the previous VWAP method
Previously, closing prices were calculated using the Volume Weighted Average Price (VWAP) of trades executed during the final 30 minutes of the trading session, News on AIR reported. Under the new framework, eligible F&O stocks in the cash market will have their closing prices discovered through the Closing Auction Session instead.
Key changes at a glance:
- Non-F&O stocks: no change to the 3:30 pm close.
- F&O stocks: continuous trading ends at 3:15 pm, followed by a closing auction running from 3:15 pm to 3:35 pm.
- Stock and index F&O: trading continues until 3:40 pm, a 10-minute extension.
- Closing price methodology for eligible F&O stocks shifts from VWAP to auction-based discovery.
Staggered market close takes effect tomorrow
The introduction of the Closing Auction Session means the Indian cash and derivatives markets will no longer close at the same time. The NSE's revised schedule takes effect from tomorrow's trading session, according to News on AIR. With the rollout, closing prices for F&O stocks will be established through the auction, while non-F&O stocks continue to close through regular trading. The exact closing price for auction-eligible stocks will be determined at the end of the 3:15 pm–3:35 pm session, and derivatives trading will continue until 3:40 pm.
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