Why BSE shares are up 10% in 3 sessions
What's the story
BSE shares have witnessed a remarkable surge, rising by 2% to a day's high of ₹3,475 on the NSE today. This marks the third consecutive session of gains for the company, taking its total increase over this period to an impressive 10%. The recent rally can be attributed to a circular issued by SEBI regarding the recently introduced Closing Auction Session (CAS).
Regulatory response
SEBI to review methodology for derivative contracts' settlement prices
On Thursday, SEBI announced its decision to review the methodology for determining settlement prices for derivative contracts on expiry.
This comes after market participants raised concerns over the new CAS in the equity cash market.
"Having considered the experience of the initial period of CAS implementation and the feedback received from various stakeholders, Sebi may be proposing certain changes in the methodology for determining settlement prices of derivative contracts," said SEBI in a statement.
Market response
CAS implementation leads to decline in trading volumes
The introduction of CAS has been met with mixed reactions, with some stock exchanges admitting that it has led to a decline in trading volumes.
According to an ET report, equity derivatives turnover on the NSE and BSE fell to multi-month lows in August.
Analysts attributed this decline to increased volatility under the new CAS mechanism, which prompted many market participants to reduce their derivatives activity during the last half-hour of trading.
Market impact
Jefferies proposes solutions to address CAS challenges
Wall Street brokerage Jefferies highlighted that the main issue with CAS has been its uncertainty on expiry day, which has kept option writers away from the market.
This has also hurt proprietary traders' profitability.
Jefferies suggested three possible solutions for SEBI to address these challenges: decoupling options expiry from the CAS window, enhancing stock lending and borrowing mechanisms, and expanding the auction pool.