Sebi For Close Auction Session In Equity Markets

New Delhi: Markets regulator Sebi has proposed introducing a Close Auction Session (CAS) framework in the country to determine the closing price of stocks in the equity cash market.

Currently, the closing price of stocks in India is determined using Volume Weighted Average Price (VWAP) of the last 30 minutes of the trading day. While the mechanism facilitates determination of a fair market closing price, it does not allow trades at the exact closing price. The introduction of CAS would reduce price volatility during the market close, especially on index rebalancing and derivative expiry days, ensuring better execution of large orders at the closing price and minimizing tracking differences for passive funds, enhancing alignment with index performance. In its consultation paper,

Sebi noted that passive fund investing has been growing globally and in India. As the weightage of Indian stocks in major international indices rises, challenges in tracking indices have emerged for passive funds. It further said that the current system of determining the closing price in India using the last half-hour Volume Weighted Average Price can lead to tracking differences for passive funds, ultimately impacting investors.