MSCI rebalance to test India’s new closing auction as $4 billion in flows hit CAS
Expected passive-fund turnover is nearly 30 times typical auction volumes, raising liquidity and volatility concerns
India's newly implemented closing auction system faces its most significant challenge yet as billions of dollars in passive-fund trades flow through it. The quarterly MSCI Inc. index rebalancing on Monday will test the mechanism's ability to handle large institutional orders without causing sharp price swings. Brian Freitas, founder of Periscope Analytics, predicts the rebalance could trigger $5 billion in trading turnover, with $4 billion passing through the Closing Auction Session.
This is nearly 30 times the typical daily turnover of about $125 million. The Securities and Exchange Board of India's most recent market reform is under scrutiny following trader backlash and a "flash crash" in the BSE Sensex gauge during the 20-minute auction last week. MSCI will monitor the auction's practical effectiveness based on feedback from market participants.
Written by urgent.news from Hindu BusinessLine's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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