India's August 3 closing auction increases end-of-session unpredictability for stocks
Business
India's new closing auction system, rolled out on August 3, is making the last few minutes of stock market trading way more unpredictable.
Since it now decides official closing prices for stocks tied to futures and options (like those in Nifty 50 and Sensex), even small trades can trigger big price swings right before the market shuts.
Options traders face thin NSE liquidity
Options traders are feeling the heat as risks have shot up and liquidity has dropped sharply.
Bernstein notes that just 1.6% to 2.3% of daily NSE turnover now happens in the final 15 minutes, compared to a usual 10.1%.
This means less action, so prices can jump around more easily, making life trickier for both buyers and sellers trying to close out positions.