Markets regulator Sebi has told large broking houses that the newly introduced Closing Auction Session (CAS) will not be rolled back despite teething problems, according to a Business Today report. At a meeting with representatives from large broking houses on Wednesday, Sebi officials interacted to understand the problems and asked the brokers to make investors aware of the system. The regulator also asked brokers to display the prices discovered through CAS on their apps and trading platforms — figures that many investors have been saying were missing from some of those platforms.
Sebi rules out rollback
According to people in the know, Sebi told brokers that the system would not be rolled back. The meeting came a day after stock exchanges took feedback from market participants to understand the initial glitches that traders and investors were facing in CAS. CAS is the newly introduced system for closing price discovery for stocks that are also traded in the derivatives segment of the bourses.
Sebi told brokers that the system would not be rolled back, according to people in the know.
Nifty spike and NSE-BSE divergence
One of the major pain points for market participants was the sharp spike in the value of the Nifty 50 index on NSE between the time normal trading closed at 3.15pm and the post-CAS closing at 3.30pm, the report said. The Sensex on BSE, however, did not show much spike in values. Traders also pointed out that there was divergence between the prices of the same stock on NSE and BSE. According to a trader, the sudden spike in prices and index values on NSE was because more institutional traders trade on NSE than on BSE.
Issues flagged by market participants
| Issue | Exchange | Detail |
|---|---|---|
| Sharp index spike | NSE | Nifty 50 value spiked sharply between the 3.15pm close of normal trading and the 3.30pm post-CAS closing |
| Limited index movement | BSE | Sensex did not show much spike in values |
| Price divergence | NSE vs BSE | Same stock traded at different prices on the two exchanges |
| Cause cited by a trader | NSE | More institutional traders trade on NSE than on BSE, causing the sudden spike |
What brokers have been asked to do
During the meeting, the regulator asked brokers to display the prices discovered through CAS on their apps and trading platforms, according to the report. Many investors have been saying these figures were missing from some of those platforms. The regulator also asked the brokers to make investors aware of the system as part of the effort to smooth the transition to the new closing-price mechanism.
Significance for investors and platforms
With the regulator ruling out a rollback, CAS will continue to determine closing prices for stocks that are also traded in the derivatives segment of the bourses. Trading platforms now need to show the CAS-discovered prices on their apps, as directed by Sebi, and brokers are expected to build awareness among the investing community, according to the report. The sharp movement in Nifty 50 after normal trading hours and the divergence between NSE and BSE prices were the key issues raised during the feedback process, and market participants will be watching how the system settles in.
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