India’s markets regulator, SEBI, has acknowledged the need for more time to stabilise the new Closing Auction Session, as initial trading days saw sharp swings, raising questions on liquidity and price stability.
India’s markets regulator said the new Closing Auction Session needs time to settle down after its first few trading days produced sharp late-session swings in the Nifty and raised fresh questions about liquidity and price discovery. According to the report in Zee Business, Securities and Exchange Board of India chief Tuhin Kanta Pandey said the mechanism is a major market-structure change broadly in line with global practice, but added that participation must build before the system can be judged properly.
The concerns have centred on the first sessions under the auction framework, which began on August 3. Moneycontrol reported that SEBI introduced the phased rollout of the Closing Auction Session in the equity cash segment to set closing prices through an auction rather than the existing volume-weighted average price method, initially covering stocks with derivatives contracts. The auction window runs from 3.15 pm to 3.35 pm, and the reform was designed to improve the reliability and fairness of closing prices.
Market participants, however, have flagged the scale of the moves seen in the final minutes of trading. On August 3, the Nifty rose by about 201 points in the closing stretch, while on August 4 it gained roughly 152 points, according to the figures cited in the Zee Business report. Traders have argued that thin liquidity during the auction could make some stocks and indices more vulnerable to manipulation, particularly in names with lower cash-market turnover.
Pandey said SEBI is reviewing feedback from market participants as it looks for ways to deepen participation in the new system. He also said the regulator will issue a paper within 10 days on how to deal with losses suffered by retail investors, the Zee Business report said. The comments come as SEBI also continues to warn retail investors about the risks of speculative trading in derivatives, a message Pandey has reiterated in recent remarks reported by The Economic Times and The Indian Express.
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