Sebi explores VWAP settlements, tighter bands to fix closing auction issues

India's securities regulator is examining several structural modifications to resolve issues that emerged following the introduction of the new closing auction session, according to market participants tracking regulatory developments.

Among the potential fixes being explored by the Securities and Exchange Board of India are amendments to settlement mechanisms based on volume-weighted average prices and the implementation of tighter price bands during the closing auction window. These measures aim to enhance market stability and reduce volatility in the final trading session.

Brokerage firm HDFC Securities has signalled optimism about the exchange's recovery trajectory, maintaining an 'Add' rating on BSE. The firm's assessment suggests that the initial regulatory headwinds associated with the closing auction session implementation have largely subsided, paving the way for the bourse to regain momentum.

Market participants have welcomed regulatory efforts to fine-tune the closing auction mechanism, which was introduced to provide better price discovery at market close. Industry observers anticipate that any refinements introduced by Sebi will further strengthen the auction process and restore investor confidence in the exchange's closing price mechanism.