BSE courts HFT firms to boost closing auction liquidity

BSE Ltd. is engaging with high-frequency traders and other market participants to boost day-end trading volumes after thin liquidity under the newly introduced closing auction system triggered sharp price swings.

HFT firms, proprietary traders and retail investors are not participating as they “seem to be not seeing benefit of this system,” Sundararaman Ramamurthy, CEO and managing director at the oldest Indian bourse operator, said in an interview Wednesday with local television channel Zee Business.

“We are talking to them as their participation will only make CAS a success,” Ramamurthy said. “Some minor changes will always be considered to make the system more efficient.”


The new method — rolled out to align Indian markets with major global peers — has faced hiccups since its Aug. 3 launch, with the latest index rebalancing witnessing sharp swings in most stocks. The mechanism has also shrunk options turnover at BSE and its listing-bound larger rival National Stock Exchange of India Ltd.

Average daily turnover for index options premium declined to its lowest in about a year and a half in August, Jefferies Financial Group Inc. analysts wrote in a note, cautioning that the closing auction has negative implications for BSE and Billionbrains Garage Ventures Ltd., the parent of top broker Groww.

BSE’s shares fell more than 3% on Wednesday, extending their slide since the start of August to nearly 19%.