Capital market stocks gained significantly on Friday, September 4, 2026, following SEBI's announcement of a review of Closing Auction Session (CAS) settlement rules. The Nifty Capital Markets index rose 1.09% to 5,415.80, with BSE shares advancing 3.41% and Angel One gaining 5.66%. Other notable gainers included Multi Commodity Exchange of India (1.93%), Groww (1.63%), Motilal Oswal Financial Services (1.54%), and KFin Technologies (0.59%). The positive market reaction reflects investor confidence in SEBI's commitment to addressing concerns raised by market participants about the CAS mechanism.
The Securities and Exchange Board of India (SEBI) announced it will introduce changes to the methodology used to determine settlement prices for derivative contracts following the implementation of the newly introduced Closing Auction Session (CAS). According to The Economic Times, the regulator is expected to announce the changes in about a week, with SEBI stating it has engaged with market participants and other stakeholders after receiving feedback and suggestions on the CAS through multiple channels, including social media and other media platforms. A consultation paper will be issued in about a week to propose potential changes based on the experience of the initial implementation period and feedback received from various stakeholders. The proposed changes would be taken up for consultation with stakeholders before being finalised.
HDFC Securities maintained an ADD rating on BSE and cut its target price marginally to ₹3,850 from ₹3,900, citing early volume improvement and resilient market share. The brokerage believes BSE could see a recovery in derivatives volumes after a sharp disruption caused by the introduction of the Closing Auction Session (CAS). However, it lowered its FY27 and FY28 earnings estimates by 4% and 2.3%, respectively, to account for weaker derivatives activity following the CAS rollout. The regulatory impact appears to be largely behind the exchange, with analysts expecting potential regulatory changes to address hedging challenges around expiry trading days.
The latest market data reveals the significant impact of CAS on equity derivatives trading. According to Zee Business Managing Editor Anil Singhvi's analysis, by 3:30 pm during the CAS, the Sensex had fallen to 76,152, representing a drop of around 400 points in the final 15 minutes. The sharp move affected other indices as well, with Nifty and Bank Nifty both ending at their day's low after the CAS. Midcap Select closed at its day's high during the same period, highlighting the divergent impact across market segments. The closing levels of all four indices were not visible on the screen during the day, as per Singhvi's analysis. The volatility has been particularly pronounced in derivatives, with the 76,400 put option seeing its price rise by as much as 446% in 15 minutes, while the 76,300 call option fell from ₹380 to zero. As per Jefferies, the key challenge has been uncertainty on expiry day, forcing option writers to stay away from the market and reducing the profitability of proprietary traders.
The review addresses significant concerns raised by market participants regarding the Closing Auction Session mechanism. As reported by The Economic Times, a significant area of feedback relates to the determination of settlement prices of derivative contracts on expiry based on the closing price determined through CAS. Under the current system, the closing price discovered through the CAS is used for determining the settlement price of derivative contracts on expiry, making the closing auction important for traders holding derivative positions on expiry days. Wall Street brokerage Jefferies noted that the key challenge has been uncertainty on expiry day, forcing option writers to stay away from the market and reducing the profitability of proprietary traders. The CAS was introduced in the equity cash segment from August 3, 2026, with SEBI having issued the circular for the new mechanism on January 16, 2026. SEBI is now considering whether the settlement price methodology needs to be changed after its experience with CAS, with the regulator having earlier consulted market participants before introducing the system.
The implementation of CAS has significantly impacted equity derivatives trading volumes across major exchanges. According to The Economic Times, NSE's total monthly equity derivative turnover stood at ₹34.48 lakh crore in August, the lowest since November 2023, while BSE's August turnover was ₹32.2 lakh crore, the lowest since June 2025. Traders have complained about sudden swings in the closing auction leading to large changes in option prices in the final minutes of trade, especially when contracts are close to expiry. The volatility has prompted several market participants to scale back derivatives activity, particularly during the final half-hour of trading. As per Jefferies, the industry's August 2026 index options premium ADTO of ₹53,900 crore was the lowest since February 2026, with options ADTO falling 20% month-on-month led by uncertainty around CAS. The consultation paper expected next week will be closely watched by brokers, proprietary desks, institutional investors and active derivatives traders, with any change in methodology potentially reducing the chance of sudden option price spikes in the final minutes.
