India regulator asks brokers to accept orders during closing auction transition to boost liquidity, brokers say

According to Business Recorder, citing three brokers who spoke to Reuters without being named, SEBI has directed intermediaries to take orders during the five-minute handover that precedes the closing auction session. At present, the window between 3:15 p.m. and 3:20 p.m. IST stays closed to new orders, because those minutes are used to work out reference prices. The aim, the brokers said, is to widen market participation and make price discovery more efficient.

The new closing method, in place since August 3, has coincided with sharp swings in the Nifty 50 and BSE Sensex during its first few sessions. Analysts linked the volatility to thin liquidity and depth in the securities lending and borrowing (SLB) segment, which makes it hard to short a stock. Exchanges have responded by publishing indicative index prices during the auction and introducing contracts with shorter tenors in the SLB market.

HDFC Securities' managing director and CEO, Dhiraj Relli, said after-market orders would be accepted from September between 3:15 and 3:20 p.m. to sharpen price discovery. The regulator has held several meetings with brokers on refining the new closing method, according to the brokers. SEBI had not immediately replied to a Reuters request for comment.