India’s Securities and Exchange Board of India has reported no manipulation in its new end-of-day pricing mechanism, as market participants gradually adopt the reform designed to enhance transparency and fairness.
The Securities and Exchange Board of India has not seen any signs of manipulation in the new closing auction system used to set end-of-day prices, chairman Tuhin Kanta Pandey said on Wednesday, even as the reform continues to draw scrutiny from some market participants.
Speaking in Mumbai, Pandey described the closing auction as a major market structure change that brings India closer to global practice. The mechanism, which began on August 3, gives exchanges a 20-minute window to collect buy and sell orders before fixing a single closing price at the level where the most shares can be matched.
The new process replaced the earlier approach of using the volume-weighted average price of trades in the final 30 minutes of normal trading. SEBI says the change is intended to make closing prices fairer and more transparent while also improving execution for large orders and reducing tracking error for passive funds, such as index-tracking mutual funds.
Pandey said the regulator is reviewing feedback to encourage greater use of the system. He noted that any new mechanism takes time to settle and attract wider participation. SEBI has also said mutual fund participation in the closing auction rose from about 5% to 6% on the first day to roughly 20% to 25% in the days that followed.
The phased rollout, announced earlier this year, initially applies only to stocks that have derivatives contracts, while other securities continue to use the old pricing method for now. That limited launch reflects SEBI’s effort to test the system gradually while market observers watch to see whether trading volume deepens and whether the new auction becomes the dominant close-setting method.
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