India’s Securities and Exchange Board (SEBI) proposed significant changes to the closing auction system, including a potential return to the previous derivatives settlement method on expiry days. The regulator’s move comes after sharp price swings and liquidity issues surfaced around the auction mechanism introduced about a month ago, according to livemint.com.
The proposed amendments detailed in a SEBI discussion paper cover several aspects of the auction system, such as the derivatives settlement price, auction trading time, and rules on order cancellations. These changes aim to address market concerns following the implementation of the new closing auction process, which has faced criticism from traders and market participants for its volatility and liquidity impact.
The closing auction system is crucial for determining end-of-day prices and derivatives settlements in India’s stock markets. The recent price swings and liquidity challenges have raised questions about the effectiveness of the new mechanism. SEBI’s willingness to reconsider the derivatives settlement method and other auction parameters highlights the regulator’s responsiveness to market feedback and the importance of maintaining orderly market functioning.
SEBI’s discussion paper outlining the proposed changes was published on September 12, 2026, marking a key step in revising the auction system to stabilize market operations and restore investor confidence.