2 weeks ago
Experts seek tighter price bands, live reference prices for CAS
The stock market in India has a special moment at the end of each trading day called the closing auction.
During this time, the final price of a stock is decided.
Some people feel this part of the market does not work perfectly.
The head of the market regulator, Sebi, said the closing auction is here to stay but might be changed.
Experts have shared ideas to make it better.
Some want the allowed price range to be smaller so prices don't jump around.
Others want the reference price to be shown live for more transparency.
Another idea is to use different ranges for different stocks.
One expert said more people should be encouraged to sell during this time.
The regulator says it is looking at all these suggestions.
Sebi Chairman Tuhin Kanta Pandey said the closing auction session (CAS) will stay, with tweaks under consideration.
Brokerages want a narrower order band than the current +/-3% range used during CAS.
Chandan Taparia suggested narrowing the band and displaying the reference price live to reduce index volatility.
A brokerage official proposed stock-specific order ranges based on individual stocks' volatility and index weightage.
Venkatachalam Shanmugam urged boosting sell-side participation from FPIs, mutual funds and SIFs to improve CAS liquidity.
- Who
- Sebi Chairman Tuhin Kanta Pandey and market experts including Chandan Taparia of Motilal Oswal Financial Services and Venkatachalam Shanmugam, former head of research and administration at MCX.
- What
- Experts proposed tweaks to the closing auction session (CAS), including tighter price bands, live reference prices, stock-specific order ranges and greater sell-side participation.
- Where
- Indian securities markets, regulated by the Securities and Exchange Board of India.
- When
- Pandey made his remarks on Monday; the article gives no exact date.
- Why
- To reduce volatility and price spikes, improve liquidity and increase participation during CAS.
Reform-First Experts
Wait-and-Watch Camp
Speed of CAS changes
Reform-First Experts
Experts such as Chandan Taparia and brokerage officials want quicker rationalisation, such as narrowing the +/-3% band and introducing stock-specific ranges.
Wait-and-Watch Camp
Mutual fund managers prefer a wait-and-watch policy, saying the system needs more time to settle down before further changes.
Design of the order band
Reform-First Experts
Some experts back a narrower uniform band for all stocks to cut index volatility during CAS.
Wait-and-Watch Camp
A senior brokerage official argues for stock-specific bands because stocks have different index weightages and volatility.
Key facts
- Regulator
- Securities and Exchange Board of India (Sebi)
- Sebi Chairman
- Tuhin Kanta Pandey
- Current CAS order band
- +/-3%
- CAS status
- Here to stay, with tweaks under deliberation
- Key proposals
- Narrower band, live reference price, stock-specific ranges
- Liquidity suggestions
- Encourage FPIs, domestic mutual funds and SIFs to sell during CAS
- SLBM suggestions
- Bulk portfolio orders, lower risk-management charges, wider stock universe
Quotes
Senior brokerage official
Representative of a brokerage firm
““As the weightage of stocks in the indices is not the same, we cannot have the same range for placing orders during CAS. Currently, large orders placed within this range in stocks with the highest weightage are leading to spikes in the indices during the last 15 minutes,” the official said.”
financialexpress.com
Tuhin Kanta Pandey
Chairman of the Securities and Exchange Board of India
““I have myself seen a number of suggestions which have come from social media. Our teams have gone through them and they are discussing them with the participants,” he added.”
financialexpress.com
Sources
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