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This would replace the current practice of using the Volume-Weighted Average Price (VWAP) of the last 30 minutes of the trading day.
The regulator highlighted that while VWAP facilitates fair price determination, it does not allow trades to occur exactly at the closing price.
With the rise in passive investing, SEBI is concerned about investors facing the impact of tracking differences, especially on eventful days marked by heightened market volatility.
In a call auction session, buyers and sellers submit price quotes, which are used to calculate an equilibrium price. This price then becomes the security’s official closing price.
Also read: SEBI proposes converting ITM options into futures one day before expiry
Under the proposed CAS framework, buyers and sellers would quote prices during a call-auction session to determine an equilibrium price, which would then become the closing price.
This mechanism, widely used in global markets, aims to minimise tracking differences for passive funds, ensure better order execution, and reduce price swings near market close.
SEBI suggested implementing CAS in a phased manner, starting with stocks that have derivatives, to ensure adequate liquidity. The proposed session would run from 15:30 to 15:45, divided into stages for reference price determination, order input, and final trade matching.
The regulator has sought public comments on the proposal by 26 December.
