Now Reading: Sebi’s new closing auction rattles F&O traders, volumes plunge
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Sebi’s new closing auction rattles F&O traders, volumes plunge
The Securities and Exchange Board of India's (Sebi) new closing auction session (CAS) for 208 derivatives stocks has caused a sharp drop in futures and options (F&O) volumes in its first week.…
The Story in Brief
The Securities and Exchange Board of India's (Sebi) new closing auction session (CAS) for 208 derivatives stocks has caused a sharp drop in futures and options (F&O) volumes in its first week. Average traded volumes of Nifty and Bank Nifty index futures fell 40% to 69,982 contracts in the week ended 7 August from 134,754 contracts the previous week, according to NSE data. Weekly index options volumes also declined.
The auction, which replaced the half-hour volume-weighted average price, determines a single closing price based on orders placed between 3.20 pm and 3.30 pm. Limited participation from arbitrageurs and retail investors has led to thin liquidity and volatile spreads. Sebi told brokerages the system will not be rolled back, calling the issues teething problems. Goldman Sachs noted weaker-than-expected participation left liquidity thinner than anticipated. Zerodha estimates the system could reduce industry earnings by 1% to 5%.
The Indian Opinion
Hype about market reform meets reality as the closing auction leaves traders exposed. The narrative that Sebi’s system mirrors global best practice ignores that India’s retail-driven, expiry-obsessed market is not America. Liquidity did not arrive on schedule. The real test is not whether the auction stays, Sebi has made that clear, but whether arbitrage funds and retail traders return. If next Thursday's expiry shows another 1% gap between the Nifty's 3:15 level and its closing price, the 'teething problem' label will wear thin.
Sources (2): livemint.com, timesofindia.indiatimes.com
This story was synthesised by AI from the 2 sources linked above.
Updated: this story now draws on 2 sources.
