BSE chief says most players still avoid new closing auction

Most market participants are still staying away from India’s new closing auction system, according to the top executive at Asia’s oldest stock exchange, signaling that the month-old mechanism is yet to overcome initial hiccups.

While a few institutions are taking part, other players are “not significantly present,” BSE Ltd.’s Chief Executive Sundararaman Ramamurthy told Bloomberg Television in an interview. Stabilizing the window is the bourse’s key focus, he said.

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The comments highlight that challenges persist for the closing auction, which was introduced to improve price discovery and align the market with global practices. Thin participation has contributed to sharp swings in the final minutes of trading, raising concerns as these prices are used to settle expiring equity derivatives.

The Securities and Exchange Board of India said last week that it may propose changes to equity-derivatives settlement pricing following feedback over the volatility. The regulator plans to publish a consultation paper within a week.

Volumes in the auction remain subdued, though participation has begun to improve slightly on the National Stock Exchange of India Ltd. Bourses have been engaging with high-frequency traders and other market participants to deepen liquidity.