A lot of discussion has been around the sharp closing moves since the Closing Auction Session (CAS) was introduced.
CAS is not the reason for these structural limitations, but it makes them more apparent. There might be tweaks required in how CAS itself works. But the larger issue of our markets being shallow is a complicated problem to solve.
I wanted to understand the CAS more clearly and I’ve been referring how the US closing auction works.
In India, normal trading stops at 3:15 pm, and then the Closing Auction Session (CAS) begins. During this time, you can’t trade as usual you can only place auction orders.
In the US, from what I read, normal trading continues until the market closes, while the closing auction runs alongside it. That feels like a much simpler setup.
I can’t help but wonder if stopping normal trading is one of the reasons we’re seeing lower participation, thinner liquidity, and bigger price moves during the auction.
Maybe the exchanges could have kept continuous trading open until the close, similar to the US. It might have made the transition easier and improved participation from the start.
If normal trading is ongoing , then why would retailers participate in the auction market ?
Maybe SEBI could keep one exchange open for normal trading and use other exchange for auction orders.