SEBI Rules Out Immediate Changes To Closing Auction Session
· Free Press Journal
The Securities and Exchange Board of India (SEBI) has no immediate plans to revise the newly launched Closing Auction Session (CAS) framework and will continue monitoring its implementation.
According to a report by Moneycontrol, SEBI believes there are no issues with the design or technical structure of CAS and is not considering any modifications at this stage.
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The regulator’s focus is currently on increasing participation in the auction process and helping market participants adjust to the new mechanism.
SEBI Chairman Tuhin Kanta Pandey held discussions with market participants and brokers on Tuesday.
Markets Snap Four-Day Winning Streak, Sensex Falls 210 Points As New Closing Auction Triggers VolatilityAlthough the meeting was scheduled to discuss another matter, the newly introduced CAS framework also came up during the discussions. The conversation focused mainly on improving participation levels in the closing auction.
According to the sources cited in the report, SEBI considers wider participation critical for the success of CAS.
The regulator noted that participation improved on the second day of implementation compared with the first day, and expects liquidity in the auction window to strengthen further over time.
SEBI believes that increased participation will help reduce the sharp price movements witnessed during the initial sessions.
The regulator has also encouraged traders to make better use of the indicative equilibrium price displayed during the auction period to place orders more effectively.
The Closing Auction Session was introduced on August 3, replacing the earlier Volume Weighted Average Price (VWAP)-based method for determining closing prices of stocks with active futures and options contracts.
Under CAS, buy and sell orders are matched through an auction mechanism to arrive at a single closing price.
SEBI introduced the reform after studying closing auction practices followed by major global exchanges.
The regulator believes the system will improve price discovery, bring more liquidity into a single closing window, support execution of large institutional orders and increase transparency, as closing prices influence derivatives settlement, index calculations and mutual fund net asset values.