India's Closing Auction Session Safeguards Exposed to Manipulation Risks
· Business · Economic Times
India introduced the Closing Auction Session on August 3 to improve price discovery by aggregating buy and sell orders into a single equilibrium price at market close. However, allowing order cancellations until the auction ends has exposed vulnerabilities to potential market manipulation. On August 13, the ninth trading day of CAS and a Sensex weekly expiry, the auction's indicative price spiked within seconds followed by two more sharp moves. SEBI passed an interim order on August 19 finding prima facie manipulation and impounding the alleged gains. The order describes one party placing an aggressive order linked to its expiry-day options positions while another placed large sell orders across eight Sensex constituents.
Why it matters
Market participants and regulators face heightened risks of price distortion at market close, which can impact mutual fund NAVs, index values, and derivatives settlements. Strengthening auction safeguards is critical to protecting the broader financial system from manipulation.
Read the original report — Economic Times
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