8 hrs ago
Expiry-Day Volatility Persists as Indian Indexes Swing Sharply
Indian stock markets moved up and down sharply on Tuesday.
This happened during a day when futures and options contracts expired.
The Nifty and Bank Nifty both fell heavily during the final part of trading.
They recovered some of their losses before the market closed.
A system called the Closing Auction Session helps decide some closing prices.
Traders have seen bigger price swings on expiry days since this system began.
SEBI is studying whether the system can be changed to reduce these swings.
SEBI Chairman Tuhin Kanta Pandey said the system will stay, while liquidity is expected to improve over time.
The Nifty fell as much as 2.2% to 22,879 during the indicative closing period before recovering some losses.
Bank Nifty dropped more than 1,400 points to 55,196, then ended 811.8 points lower at 55,794.75.
The Nifty closed down 279.5 points, or 1.2%, at 23,118.6, while the Sensex fell 1.04%.
The Closing Auction Session framework was introduced on August 3 for stocks with futures and options contracts.
SEBI is reviewing the mechanism, but Chairman Tuhin Kanta Pandey said the framework would remain and liquidity should build over time.
- Who
- Indian equity-market participants, SEBI, and SEBI Chairman Tuhin Kanta Pandey.
- What
- The Nifty, Bank Nifty, and Sensex recorded sharp losses and swings during an F&O expiry session.
- Where
- Mumbai and the Indian equity markets.
- When
- Tuesday; the Closing Auction Session was introduced on August 3, and Pandey discussed its review earlier in September.
- Why
- The volatility was linked to expiry-day settlement prices and the recently introduced Closing Auction Session framework.
Concerns About CAS Volatility
Case for Retaining CAS
Expiry-day price swings
Concerns About CAS Volatility
Market participants have reported increased volatility in derivatives prices, particularly during the closing auction period, since CAS was introduced.
Case for Retaining CAS
SEBI Chairman Tuhin Kanta Pandey said initial liquidity problems can improve as liquidity builds over time.
Future of the framework
Concerns About CAS Volatility
SEBI is examining ways to reduce volatility linked to expiry-day settlement prices and is reworking the closing-price methodology.
Case for Retaining CAS
Pandey said the Closing Auction Session framework is here to stay despite the challenges following its rollout.
Key facts
- Nifty intraday low
- 22,879, down 2.2% during the indicative closing period
- Nifty close
- 23,118.6, down 279.5 points or 1.2%
- Bank Nifty intraday low
- 55,196, after falling more than 1,400 points
- Bank Nifty close
- 55,794.75, down 811.8 points or 1.43%
- Sensex close
- 74,003.82, down 777.94 points or 1.04%
- CAS introduction
- August 3 for stocks with futures and options contracts
- Regulatory response
- SEBI is reviewing the methodology for expiry-day closing prices
Sources
Related news
Sensex Swings 2,200 Points During BSE Closing Auction
SEBI May Revise Closing Auction Settlement Rules After Volatility
SEBI Keeps Closing Auction Session, Changes Derivatives Price Rules
SEBI Keeps Closing Auction Session Unchanged Amid Expiry Volatility
Nifty Swings 850 Points During Volatile Closing Auction Session
SEBI Reviews Derivatives Settlement Methodology After CAS Volatility
SEBI Weighs Expiry-Day Settlement Prices as Expert Favors VWAP
SEBI Plans AI Oversight Toolkit and Tokenised Bond Pilot
