India’s markets regulator, SEBI, reports that the initial discrepancies observed after the launch of the new Closing Auction Session on August 3 are narrowing, as the system stabilises and feedback is incorporated, aiming to enhance transparency and price discovery in the market.
India’s markets regulator said on Wednesday that the initial gaps seen after the launch of the Closing Auction Session on August 3 have narrowed, as the system settles in and officials continue to gather feedback from brokers, exchanges and investors.
Tuhin Kanta Pandey, chairman of the Securities and Exchange Board of India, said the regulator is watching the new mechanism closely and is prepared to refine it if needed. He said the opening days produced wider differences between indicative levels and final closes, including on the Sensex and Nifty, but that the pattern has improved since then.
The Closing Auction Session was introduced to replace the older volume-weighted average price method for determining closing prices in eligible shares. SEBI has said the earlier approach could allow a small trade placed near the end of the day to have an outsized effect on the final price, creating scope for market abuse and the practice known as marking the close.
Under the new framework, the auction runs as a 20-minute session from 3:15 p.m. to 3:35 p.m. on trading days for stocks with derivative contracts. SEBI announced the phased rollout in January, while exchanges later held mock trading sessions to help brokers adjust to the new rules and test the process before launch.
Pandey said the system is designed to improve price discovery by giving market participants a transparent reference point at the close, which matters for index funds, passive investing and mutual fund net asset value calculations. He added that the mechanism is not opaque because indicative prices are visible during the auction and that some brokers have already started showing them on their platforms, with wider integration expected on mobile apps.
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