CAS imbroglio: NSE clarifies all is well

The National Stock Exchange (NSE) issued a clarification on Monday stating that the Closing Auction Session (CAS) was implemented under the guidance of the Securities and Exchange Board of India (SEBI) to promote transparency and fair price discovery. The clarification followed a surge in Nifty 50’s closing value, which jumped nearly 200 points after the trading day ended, surprising market participants. This unusual divergence between cash and futures prices led to confusion among market members.

Major indices and several stocks exhibited an atypical gap between cash and futures prices during the CAS, which occurred between 3:15 pm and 3:30 pm. The NSE clarified that no actual trades took place during this period, and the index remained unchanged. Instead, orders were collected, modified, cancelled, and matched, with indicative index values displayed on the NSE website. These values were continuously updated based on equilibrium prices calculated during the CAS, even without any trades occurring.

Furthermore, both the NSE and the Bombay Stock Exchange (BSE) maintain separate order books during the CAS, similar to normal trading sessions. Consequently, individual stock prices can differ between the two exchanges, as the index is calculated using the prices of its constituent stocks. The NSE explained that the index values on both exchanges may also vary due to the separate order books and the calculation method.

The NSE reported that on the first day of CAS implementation, 515 trading members participated, placing orders for 56,773 unique PANs. This participation level surpassed that of the Pre-Open Call Auction Session, which had 403 trading members placing orders for 42,822 unique PANs. The NSE emphasized that the CAS was a new initiative, and the participation levels were expected to improve over time.