Equity Derivatives Turnover Drops in August Due to New CAS Mechanism

Indian equity derivatives turnover on both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) experienced a significant downturn in August, reaching multi-month lows. This decline is primarily linked to the recent implementation of the Closing Auction Session (CAS) mechanism.

The CAS, introduced in Indian markets during August, operates as a 20-minute window daily from 3:15 PM to 3:35 PM. During this period, buy and sell orders are collected and subsequently matched to determine a single official closing price for stocks.

Market participants have adjusted their trading behaviors due to the CAS, according to Rajesh Palviya, head of research at Axis Securities. Brokers are now squaring off positions earlier, typically between 3:05 PM and 3:10 PM, with traders also closing positions prematurely to avoid increased volatility near market close.

The early closure in the cash market also restricts arbitrageurs and jobbers from executing delta-hedging strategies across cash, futures, and options. Many algorithmic traders, proprietary desks, scalpers, and arbitrageurs, who operate on thin margins, are opting to avoid the CAS window to mitigate potential losses.

Key Turnover Figures

NSE’s total monthly equity derivative turnover in August registered ₹34.48 lakh crore. This figure marks its lowest point since November 2023.

Similarly, BSE’s August turnover stood at ₹32.2 crore, representing its lowest level since June 2025.

Regulatory Stance and Industry Views

Despite opposition from many traders and market participants who cited significant uncertainty between the live market price and the final settlement price, the Securities and Exchange Board of India (Sebi) has confirmed the CAS mechanism is permanent. Sebi Chairman Tuhin Kanta Pandey stated that no changes are anticipated, expecting enhanced participation as investors become more accustomed to the new process.

Mehul Kothari, deputy vice-president at Anand Rathi Share and Stock Brokers, noted that an altered expiry-day trading structure and lower market volatility have also contributed to reduced short-term speculative activity and options volumes.

The market anticipates further adaptation to the CAS mechanism, with regulators expecting increased investor comfort and participation as the new system integrates more fully into trading routines.