August witnessed a significant decline in equity derivatives turnover on the NSE and BSE, reaching multi-month lows as traders adapted to the new Closing Auction Session (CAS) mechanism. According to The Economic Times, NSE's total monthly equity derivative turnover fell to ₹34.48 lakh crore, marking the lowest level since November 2023. BSE's August turnover stood at ₹32.2 crore, representing the lowest since June 2025. As reported by Axis Securities head of research Rajesh Palviya, the decline in derivatives volumes is largely attributed to behavioural changes triggered by CAS, with traders opting to exit positions earlier to avoid potential pitfalls during the final trading minutes.
The Closing Auction Session (CAS) reforms, introduced by the Securities and Exchange Board of India (SEBI) in August 2025, are creating significant operational challenges for market participants. According to The Economic Times, CAS operates as a separate 20-minute session from 3:15 pm to 3:35 pm, during which the exchange collects buy and sell orders before matching them to determine a single official closing price. This system has fundamentally altered trading dynamics, with brokers squaring off positions earlier by 3:05-3:10 and traders closing positions early to avoid heightened volatility. As reported by Palviya, the early closure of the cash market also limits arbitrageurs and jobbers from executing delta-hedging strategies across cash, futures and options, particularly affecting those who operate on thin margins.
Despite the challenges, market experts believe investors should adjust rather than pause their approach. For existing investors, there is no reason to panic as arbitrage funds have delivered meaningful returns expiry-to-expiry over the last month. For new or incremental investors, experts specifically advised against putting the entire investment on a single day. According to recommendations, investors should spread their investments across three to four dates in a month to avoid single-day market risk. Market participants are also adapting to the new mechanism, with Anand Rathi's Mehul Kothari noting that the shift in expiry-day trading structure has reduced some very short-term speculative activity that was contributing significantly to options volumes.
The Securities and Exchange Board of India has maintained its commitment to the CAS mechanism despite market concerns. SEBI Chairman Tuhin Kanta Pandey indicated last week that he envisages no changes to the mechanism, stating enhanced participation as investors become more aware of the new process. However, many traders and market participants have opposed CAS, urging the regulator to roll back the mechanism due to concerns about significant uncertainty between live market prices and final settlement prices. As reported by The Economic Times, the regulator has reassured that this session mechanism is now a permanent feature. Despite the initial challenges, experts believe CAS is positive for the market over the long term despite the short-term volatility, with the structural changes potentially making returns less predictable than before.
