SEBI rules out immediate review of new closing auction session
Brokers asked to improve investor awareness and display indicative auction prices
The Securities and Exchange Board of India (SEBI) is unlikely to immediately reconsider the recently implemented Closing Auction Session (CAS), despite market concerns over the instability in Nifty's closing value following the session's introduction. Instead, SEBI has instructed brokers to enhance investor participation and visibility of auction prices, according to sources familiar with the matter.
On Wednesday, SEBI met with some of the major stock brokers and urged them to display indicative equilibrium prices and other relevant CAS-related data on their trading platforms to boost investor awareness and participation. Brokers have been tasked with educating their clients about the CAS mechanism and updating their trading systems to display the indicative auction prices, enabling investors to make informed decisions.
The framework for CAS was approved following a comprehensive review, and the regulator emphasized that it is premature to consider another review at this stage. The focus, as per a SEBI official, is on improving investor understanding and ensuring a seamless transition to the new mechanism. The launch of CAS coincided with confusion among traders, with some investors expressing concerns over the substantial fluctuations in closing prices before and after the auction.
On the inaugural day of CAS implementation, the Nifty 50 index surged 200 points following the closing auction, surpassing the last traded price from continuous trading, which now concludes at 3:15 pm. The Nifty's closing price rebounded by approximately 150 points the subsequent day, diverging from the Sensex's closing price. This divergence persisted on Wednesday, with the Sensex surging 152 points (0.2%) to close at 78,581, while the Nifty 50 gained 10 points (0.04%) to settle at 24,624.65 points.
During the 20-minute closing auction session, buy and sell orders are gathered and matched at a single equilibrium price. Investors can place, modify, or cancel auction orders based on the indicative equilibrium price, determined by matching demand and supply. Many traders could not view the indicative auction prices prior to placing an order during the auction, making it challenging for investors to gauge the market's likely settlement point.
A thin auction window amplifies the impact of even slight order imbalances, leading to sharp movements in the equilibrium price.
Written by urgent.news from Hindu BusinessLine's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
