SEBI Reviews Closing Auction Rollout, Calls Brokers’ Meeting on Investor Awareness and Price Display

The Securities and Exchange Board of India (SEBI) has convened a meeting with major brokers to assess the early implementation of the Closing Auction Session (CAS), with discussions expected to focus on improving the display of indicative prices and increasing investor awareness. According to CNBC-TV18, the market regulator has no plans to alter, suspend or roll back the new auction mechanism introduced in the equity cash market.

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The meeting comes after the first few trading sessions under the revised framework witnessed a noticeable divergence between the Nifty 50’s level during regular trading and its official closing value, prompting discussion among market participants over the functioning of the new system.

Regulator Maintains Confidence in CAS Framework

According to CNBC-TV18, SEBI believes there are no issues with the design, structure or objective of the Closing Auction Session. The regulator has reportedly encouraged brokerage firms to improve retail participation in the auction process and help investors better understand the mechanism.

The new system, introduced on August 3, replaced the earlier method of calculating closing prices based on the volume-weighted average price (VWAP) of trades executed during the final 30 minutes of trading.

Under the revised framework, continuous trading in eligible futures and options stocks ends at 3:15 pm, followed by a 20-minute auction process. The final closing auction takes place between 3:28 pm and 3:30 pm, with price movements restricted to 3% above or below the stock’s reference price.

Divergence in Benchmark Closing Levels Draws Attention

The new mechanism has drawn attention after the Nifty 50 recorded a sharp difference between its level at the close of continuous trading and its official closing value.

Speaking to Reuters, Santosh Meena, Head of Research at Swastika Investmart, said institutional buying during the relatively thin auction window on the National Stock Exchange (NSE) has resulted in stronger closing prices for several heavyweight stocks, lifting the benchmark index. He added that the BSE Sensex has not witnessed a similar impact because institutional participation in the cash market is comparatively lower.

Vinod Nair, Head of Research at Geojit Investments, told Reuters that the difference in closing levels appears to reflect initial operational challenges and said exchanges and the regulator should address the discrepancies as the system evolves.

NSE Highlights Early Participation

The Association of NSE Members of India said it is engaging with stock exchanges and SEBI to provide feedback and recommendations aimed at strengthening the framework.

In a statement, the National Stock Exchange said around 515 traders participated in the inaugural Closing Auction Session, placing orders on behalf of 56,773 unique clients. The exchange described participation on the first day as encouraging, noting that 403 traders took part in the pre-open call auction on the same day.

The NSE also clarified that there was no sudden movement in the Nifty 50 index at 3:30 pm on the first day of implementation. It explained that continuous order matching does not occur between 3:15 pm and 3:30 pm, while indicative index values based on equilibrium prices are displayed separately during the auction period. With the implementation of the system, regulators and stock exchanges will be expected to continue evaluating the performance of the system in particular with regard to investor education and transparency.