Ok, So I was confused but read about is and concluded this-
The current setup
- Equity cash market closes at 3:30 pm
- F&O market also closes at 3:30 pm
- But from 3:15-3:35 pm, NSE now runs a “Closing Auction Session” for cash stocks- basically a special window where the final price of a stock is determined by matching buy and sell orders, rather than the last traded price
The problem this creates F&O was closing at 3:30 but the final cash price wasn’t being determined until 3:35 via the auction. So derivatives were settling before the actual final cash price was even known. That’s a mismatch.
The fix- Push F&O close to 3:40 pm- after the auction ends at 3:35- so that derivatives settle against the true final auction price, not some intermediate price.
Why does this matter practically?
- If you’re hedging a stock position with options, you can now adjust right up to the actual closing price
- Price discovery at expiry becomes cleaner
- Arbitrage between cash and F&O at close becomes tighter
Closing price for cash stocks moves from VWAP-based to auction-based- which then flows into F&O settlement.
Does this make sense?