India's new closing-price auction sparks trader unease as SEBI vows to keep system
India's securities regulator defended the recently introduced closing-price auction despite traders reporting erratic price moves and broken strategies. SEBI officials said the glitches are typical early-stage issues and the mechanism will stay in place.
India rolled out a closing-price auction for over 200 stocks with derivatives, aiming to improve price discovery and align with global exchanges. In the initial sessions, traders observed unexpected swings that reversed intraday declines, prompting a flood of client inquiries and social-media chatter over mismatched closing figures. SEBI convened discussions with leading brokerages, where officials such as K.V.R Murty reassured participants that the system was only experiencing early-stage hiccups and would improve with broader participation.
Market analysts attribute the turbulence to low liquidity, noting that many proprietary and high-frequency traders stayed out or scaled back on expiry days. Goldman Sachs highlighted that thin order books allowed modest trades to move prices sharply, a concern echoed by AlphaGrep Mutual Fund's CEO Bhautik Ambani. Brokerage firms like Zerodha estimate a potential 1%-5% earnings dip, while Jefferies projects a 5%-10% reduction in overall options trading if expiry-day contracts fall 10%-20%. Despite the unrest, SEBI confirmed the auction will not be rolled back.
Why it matters
The auction determines closing prices that settle billions in Indian derivatives, affecting market stability and broker revenues.
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