With nearly 10 days remaining before the shift to the new closing auction mechanism, exchanges are conducting comprehensive preparation activities. According to reports from Business Standard, mock trading sessions were conducted over the weekend, with the latest session held on July 18 to familiarize market participants with the ecosystem and test the mechanism. Additional mock trading sessions are scheduled in the coming weeks, where brokers will participate for testing purposes.
The new closing auction session (CAS) is scheduled to come into effect on August 3, targeting enhanced transparency in closing prices. As reported by Business Standard, the mechanism will be applicable to the cash segment for securities with available derivative contracts, with closing prices determined based on CAS. Currently, approximately 210 stocks have derivative contracts, and for other securities, the mechanism may be introduced in a phased manner. The closing price for remaining securities in the cash segment will continue to be determined based on the volume-weighted average price (VWAP) of trades executed during the last 30 minutes of continuous trading session.
The CAS will operate as a separate 20-minute session from 3:15 pm to 3:35 pm, with specific timing and functionality. According to Business Standard, the reference price calculation will take place from 3:15 pm to 3:20 pm, during which no order entry will be allowed. The following five minutes will serve as the order entry period for both limit and market orders, followed by a period from 3:25 pm to 3:30 pm where only limit orders may be entered while market orders cannot be modified or cancelled. Trading may close randomly in the final two minutes, with order matching taking place thereafter.
Industry officials anticipate both benefits and challenges from the new mechanism. As reported by Business Standard, an official from the broking industry noted that while the mechanism may initially confuse retail investors due to varying closing times across different stocks, it will eventually provide greater clarity. The official emphasized that the mechanism aims to solve problems for fund houses, making closing prices more authentic. However, some industry players have suggested that if major technical issues emerge during mock trading sessions, the implementation timeline could be extended.
The equity derivatives segment will continue to operate until 3:40 pm on all trading days, while the post-close session in the cash segment will operate from 3:50 pm to 4:00 pm, during which trades will be executed at the closing price. According to Business Standard, the alignment of the pre-open auction session framework is scheduled to be implemented from September 7. The National Stock Exchange has clarified that since the CAS mechanism will be implemented in a phased manner, both actual index values and indicative index close values will be disseminated during the CAS period.
