Stock exchanges have introduced shorter-tenor securities lending and borrowing (SLB) contracts to improve short-term liquidity and to boost participation in the new closing auction session (CAS), according to people familiar with the discussions.

The three-working-day contracts, launched by NSE Clearing and BSE Clearing from Monday, will allow market participants to borrow securities for a much shorter period. Sources said this is particularly relevant for CAS, which has faced concerns over low participation and price spikes since its launch earlier this month.

The move follows recent discussions between the Securities and Exchange Board of India (SEBI), brokers and market infrastructure institutions on improving participation in CAS, the people with knowledge of the matter said.

“This is essentially one of the measures being looked at to improve participation in CAS. If participants are able to borrow securities through SLB for three days, it could make short-term trades in the closing auction more viable,” said an exchange source.

Deepen the market

The exchanges have said the new contracts will provide greater flexibility for short-term securities borrowing and delivery requirements and help deepen the SLB market. BSE Clearing also said the shorter tenor can facilitate inter-exchange arbitrage and improve price alignment across trading venues.

Dhiraj Relli, MD and CEO of HDFC Securities, said the T+3 contracts should be helpful for the closing auction and increase overall market depth. “However, we will have to wait and see how volumes pick up,” he said.

The new contracts will be generated daily and initially be available only for stocks eligible in the equity derivatives segment. Repay, recall and rollover facilities will not be available.

Will aid CAS

On the sidelines of a cyber-defence event at NISM on Monday, SEBI Chairman Tuhin Kanta Pandey said CAS is “here to stay for sure” and that greater participation is critical for the mechanism.

Pandey said SEBI will come out with a draft paper on a reformed SLB mechanism soon. “It will definitely help in CAS because we would need more participation. SLBM improves CAS participation and that has been our goal. We have a working group....I can only say very soon that means there is a sense of urgency. But at the same time different participants need to be heard.”

“CAS is a major microstructure… It really depends on our success in terms of attracting FPIs, allowing passive investing, which is already 30 per cent of the market and we cannot just put out this thing on this issue just because some people want to do options trading in the way they want to do options trading,” he said.

The earlier system of determining closing prices using the volume-weighted average price of trades during the final 30 minutes. was replaced by CAS, which determines a single equilibrium closing price by matching buy and sell orders.

The rollout has triggered concerns over sharp price spikes amid low participation and liquidity. SEBI has maintained that the mechanism needs time to settle while it continues to monitor data and industry feedback.

Published on August 17, 2026