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Sebi urges more retail participation in India’s closing auction session
The regulator raised concerns about thin liquidity and price spikes ahead of Thursday’s Sensex weekly options expiry, after Nifty and Sensex showed wider closing divergence under the new auction framework.
Securities and Exchange Board of India (Sebi) has asked brokers to encourage greater retail participation in the newly introduced closing auction session, according to people familiar with discussions shared with LiveMint Markets. The move comes as market participants worry that thin liquidity in the auction could amplify volatility in the final minutes of trading.
Sebi delivered the message during a meeting with brokers on Tuesday, ahead of the second day under the new framework, LiveMint Markets reported. Brokers agreed to the request and also relayed how the earlier cut in continuous trading, from 3:30 pm to 3:15 pm, affects arbitrage activity by asset management companies, since buy and sell legs must be initiated simultaneously.
The report said one concern was that this reduced ability for supply to match demand from large institutional players, contributing to price spikes during the auction. Sebi told brokers it would look into that aspect, LiveMint Markets added.
The discussions followed recent divergence between closing moves in the Nifty 50 and Sensex, with Tuesday’s weekly Nifty options expiry day seeing the Nifty settle down 0.64% at 24,614.9 and the Sensex down 0.27% at 78,428.95, LiveMint Markets reported. A day earlier, a 200-point spike during the auction helped the Nifty rally 1.6% versus a 0.7% rise in the Sensex, and Thursday’s Sensex options expiry was flagged as a risk point for sharp options pricing moves if liquidity remains light.
Latest closeSensex 78,094.64 ▲0.2%