Now Reading: Closing auction mechanism stabilises, traders adapt to new system
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Closing auction mechanism stabilises, traders adapt to new system
Closing auction mechanism stabilises, traders adapt to new system
The new Closing Auction Session (CAS) introduced by market regulator SEBI on August 3 is showing signs of stabilisation, with initial volatility and price differences narrowing significantly. Market expert Sudip Bandyopadhyay told…
The Story in Brief
The new Closing Auction Session (CAS) introduced by market regulator SEBI on August 3 is showing signs of stabilisation, with initial volatility and price differences narrowing significantly. Market expert Sudip Bandyopadhyay told Business Today that the gap between the 3:15 PM close and the final 3:30 PM discovered price has become very small, and traders are gradually getting used to the mechanism as uncertainty fades.
CAS replaces the earlier system where closing prices were determined by the Volume Weighted Average Price (VWAP) of the last 30 minutes of trading, which was prone to distortion from large last-minute trades. The 20-minute auction window collects buy and sell orders to find an equilibrium price. The Hindu reports that mutual fund participation in CAS has risen to 25% from 5-7% earlier, according to SEBI chairman Ruhin Kanta Pandey. The new system aligns Indian exchanges with global bourses like NASDAQ, NYSE, and the London Stock Exchange.
The Indian Opinion
Narratives about CAS causing chaos in Indian markets are proving alarmist. The initial jitters were predictable in any major market infrastructure change, but the data shows the system is settling. A balanced view would note that CAS reduces price manipulation risk, a genuine concern on index rebalancing days, while acknowledging that algorithmic trading firms must retool. The real test will be the next derivative expiry day: how well does CAS handle the convergence of cash and derivative market closings? That single session will answer whether the critics or proponents have the stronger case.
Sources (2): businesstoday.in, thehindu.com
This story was synthesised by AI from the 2 sources linked above.
Updated: this story now draws on 2 sources.
