India’s markets regulator on Friday proposed that the closing auction session (CAS) to determine share prices will be first introduced for derivatives stocks.
The Securities and Exchange Board of India will first introduce such a session for highly liquid shares, followed by other equity segments, according to a consultation paper published on its website.
A closing auction session is a trading period usually held at or near the end of a trading day to determine the final closing price of a security.
SEBI said the introduction of such a session would align the country’s equities markets with the standard followed by exchanges such as the New York Stock Exchange and the London Stock Exchange.
The regulator proposed that the closing auction session be held between 3:15 p.m. IST and 3:35 p.m. IST, near the market closing time of 3:30 p.m. It had initially proposed that the session be held after market close from 3:30 p.m. to 3:45 p.m.
The closing share price in India is currently determined by a so-called volume weighted average price (VWAP) method, which considers the average price a security has traded at throughout the day, based on both volume and price.
SEBI said the CAS method “provides a more stable and less volatile closing price”, compared to the volatility observed under VWAP, even when handling the same level of trading volumes.
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