Brokers say the move is expected to reduce revenues by curbing high-frequency and liquidity-providing trades around the close, as the closing auction would replaces continuous trading in the final 15 minutes for F&O stocks | Photo Credit: ANI

The implementation of the closing auction session (CAS) for stocks in the futures and options (F&O) segment from August 3 is expected to change the way end-of-day trades are executed, with brokers anticipating a modest hit to revenues while the process for determining closing prices becomes more transparent.

Under the new framework, continuous trading in F&O stocks will end at 3.15 pm, followed by a 15-minute auction during which buy and sell orders will be collected and matched at a single equilibrium price that maximises traded volume. That price will become the stock's official closing price. Non-F&O stocks will continue trading until 3.30 pm, while stock and index derivatives will trade until 3.40 pm.

Closing price

Currently, the closing price is calculated based on the volume-weighted average price (VWAP) of trades executed during the last 30 minutes of trading.

The changes seek to address two key issues. “Passive funds tracking indices need to execute large orders near the end of the day to match the closing price. These orders can move prices while they are being executed, increasing tracking error,” said Zerodha Co-founder Nithin Kamath. “Second, large orders placed in the final few minutes can disproportionately influence the closing prices of stocks and, in turn, the indices they are part of... Since CAS pools all orders and matches them at a single price, influencing the close becomes harder.

He said the transition could probably knock off around 1-5 per cent of brokerage income, while brokers would also have to deal with clients adjusting to different closing times across market segments.

Revenue impact

Brokers say the move is expected to reduce revenues by curbing high-frequency and liquidity-providing trades around the close, as the closing auction would replaces continuous trading in the final 15 minutes for F&O stocks.

Ajay Garg, Director and CEO of SMC Global Securities, said while institutional orders are expected to migrate to the auction, some execution-driven trading activity that generates brokerage may see some pressure, resulting in a modest impact on revenues. Delivery-based investing is unlikely to be affected materially, but the shift could slightly alter intraday trading patterns around the close, he said.

A larger share of institutional and passive fund trades is expected to migrate to the auction session over time. "The migration is likely to happen gradually rather than all at once. Institutional investors and passive funds are expected to adopt the mechanism faster, while retail participation will build as investors become more familiar with the process," Garg said.

Market participants said the auction mechanism could make it more difficult to influence closing prices through large last-minute trades and improve execution for index funds and ETFs. Some also expect changes in cash-futures arbitrage strategies, as the final cash market execution price will only be known after the auction.

Deepak Shenoy, Founder of Capitalmind, said the new framework could curb attempts to influence benchmark indices through large closing trades, as seen through large institutional orders in the past. “Now they won't easily be able to, with the CAS as their order may not even execute, or someone will be able to see it and provide a large enough quantity on the other side to ruin the exercise,” he said.

Shenoy, however, said the change could reduce opportunities for high-frequency traders and market jobbers that provide liquidity near the close, while making the overall market structure more robust over time.

Published on July 30, 2026