The stock exchange has introduced a new process called the Closing Auction Session, or CAS. This changes how the final closing price of certain shares will be determined. Here is a simple explanation of what this means and what clients should keep in mind.
In simple words
For certain shares, the closing price will now be discovered through a short auction-style process near market close instead of depending only on the last trade of the day.
Why this matters
The closing price is important for valuation, market analysis and reference purposes. A structured process helps make it more fair and more transparent.
What is the Closing Auction Session?
The Closing Auction Session, or CAS, is a special process introduced near the end of the trading day to determine the closing price of certain shares in a more systematic way.
Many investors and market participants look at the closing price as an important benchmark. It is used for valuation, settlement reference, index calculations and general market analysis. Because of this, the exchange wants the closing price to reflect actual market demand and supply as fairly as possible.
Which shares will this apply to first?
This process will be introduced in phases.
In the first phase, it will apply to shares in the cash segment where derivatives contracts are available. In other words, the exchange is beginning with stocks that are already part of the derivatives universe.
How will the reference price be decided?
Before the auction process can begin, the exchange needs a starting reference price. This reference price is important because the allowable band during CAS will be calculated around it.
If there are trades between 3:00 PM and 3:15 PM
The reference price will be based on the VWAP of those trades.
VWAP means Volume Weighted Average Price. In very simple words, it is an average price where bigger quantity trades get more weight than smaller trades.
If there are no trades in that period
The exchange may use the last traded price of the day.
If there is no trade in the security during the day, then the previous closing price may be considered, subject to adjustment where required.
What is the price range allowed during CAS?
During the Closing Auction Session in the equity segment, the permissible range will be plus or minus 3% from the reference price.
Orders during CAS can generally fall within a range of about Rs 97 to Rs 103.
This defined range helps the exchange discover a closing price in an orderly manner instead of allowing unreasonable price jumps.
Which orders are allowed during CAS?
Not every order type can be placed during the Closing Auction Session.
Allowed order types
- Limit Orders
- Market Orders
These orders can participate in the auction process used to discover the closing price.
Order types not allowed
- Iceberg Orders
- Revealed Quantity Orders
- Stop Loss Orders
How will the final closing price be determined?
For shares where CAS is applicable, the exchange will determine the official closing price based on the equilibrium price discovered during the Closing Auction Session.
If an equilibrium price is discovered
That equilibrium price becomes the official closing price for the day.
If no equilibrium price is discovered
The exchange will use the fallback reference mechanism to determine the closing price.
In simple language, the exchange now has a structured method for finding the closing price even if the auction does not produce a matched result.
What kind of information may be visible during CAS?
During the auction process, the exchange may show indicative information to improve market transparency.
- Indicative equilibrium price
- Indicative tradable quantity
- Total buy quantity and sell quantity
- Imbalance quantity
- Whether the imbalance is on the buy side or sell side
This gives market participants a better idea of how the closing price is shaping up.
What should clients keep in mind?
The closing price may work differently now
For applicable shares, the final close may now be discovered through an auction-style process rather than depending only on the last trade.
Be careful near market close
Since special rules and price band limits apply, it is wise to review your price and order type properly before placing any order near closing.
Only certain order types are accepted
Some advanced or conditional orders are not permitted during the Closing Auction Session.
This is intended to improve fairness
The aim of the process is to make the closing price more transparent, more balanced and less dependent on isolated trades.
Frequently Asked Questions
What is CAS in very simple language?
Will this apply to all shares immediately?
How is the starting reference price decided?
What is the permitted price range during CAS?
Can I place all order types during CAS?
How is the official closing price finally determined?
Why has this system been introduced?
Important Note for Clients
This is an exchange-level market structure update. Clients are advised to remain mindful while placing orders close to market closing, especially in stocks where the Closing Auction Session becomes applicable.