According to The Economic Times, BSE CEO Sundararaman Ramamurthy revealed that most market participants are avoiding the new closing auction system, with only a handful of institutions participating a month after its launch. The muted uptake is causing significant market volatility and subdued trading volumes in the final minutes of trading. As reported by The Economic Times, Ramamurthy told Bloomberg in an interview that while a few institutions are taking part, other players are 'not significantly present' in the new system. The CEO's latest comments to Bloomberg Television emphasize that stabilizing the window is the bourse's key focus, highlighting the critical importance of addressing these initial adoption challenges.
According to The Economic Times, the limited participation is causing wild price swings in the final minutes of trading, raising serious concerns as these prices are used to settle expiring equity derivatives. The comments highlight that challenges persist for the closing auction, which was introduced to improve price discovery and align the market with global practices. The latest developments show that India's benchmark indexes rose on Monday, but the Nifty 50 and BSE Sensex looked unusually out of sync right at the close as the new closing auction system was rolled out. As reported by Reuters, the Nifty 50 finished up 1.6% at 24,774.30, while the Sensex closed 0.7% higher at 78,639.03, demonstrating the volatility potential of the new system.
The Securities and Exchange Board of India has acknowledged the challenges facing the new system and is taking proactive steps to address market concerns. As reported by Moneycontrol, SEBI said last week that it may propose changes to equity-derivatives settlement pricing following feedback over the volatility. The regulator plans to publish a consultation paper within a week to address market concerns about price discovery and settlement processes. This regulatory intervention underscores the importance of the closing auction system's proper functioning for market stability, with Motilal Oswal noting that traders were waiting for National Stock Exchange (NSE) clarification on whether the Closing Auction Session played a role in Monday's divergence.
As reported by The Economic Times, the comments from BSE's top executive at Asia's oldest stock exchange provide insight into the early adoption challenges of the new closing auction system. The CEO's assessment suggests that while institutional participation is occurring, the system still needs to address concerns that are preventing broader market participation. According to Moneycontrol, bourses have been engaging with high-frequency traders and other market participants to deepen liquidity, indicating active efforts to improve participation levels and address the current volatility issues. Recent reports suggest that volumes in the auction remain subdued, though participation has begun to improve slightly on the National Stock Exchange of India Ltd.
