What is Closing Auction Session? | Explained
SEBI has introduced the Closing Auction Session (CAS) in the Indian equity market to improve price discovery and reduce volatility during market close. This mechanism aligns Indian exchanges with global standards, facilitating more accurate valuations for institutional investors.
Why it matters
The change significantly impacts how mutual funds and ETFs calculate net asset values, potentially increasing institutional investment efficiency.
The story so far: Market regulator, the Securities and Exchange Board of India (SEBI), has taken a well-calibrated step to introduce the Closing Auction Session (CAS) in the equity cash market, aiming for fair valuation, improved depth and statistical reliability of price discovery.
From an econometrics angle, it is an attempt to reduce price noise and improve the information efficiency of Indian equity markets, given that exchange-traded funds (ETFs) and index funds increasingly rely on accurate closing prices to replicate benchmarks.
CAS, introduced on August 3, is a transparent mechanism that relies more on closing auctions than on last traded prices or VWAP (Volume Weighted Average Price), implying that it converts closing price determination from passive averaging into a dynamic demand-supply discovery.
Get smarter about the news
Sign up free for a feed built around what you actually care about, Dive Deeper research on any story, and the full text of every article.
Create free accountAlready have an account? Sign in