New Closing Auction System Triggers Volatility in Indian Options
· Business · Economic Times, Bloomberg
India's new closing-auction system has caused extreme volatility in the options market, with a Bankex put option surging nearly 4,000% before crashing to zero within 15 minutes. The mechanism, intended to improve end-of-day pricing, is currently creating significant risk by compressing trading activity into a short window. Thinner liquidity at the BSE compared to the NSE has been identified as a factor amplifying these sharp price moves. The volatility arises from a mismatch between the closing processes of cash equities and options markets.
Why it matters
The new auction system exposes traders to rapid, high-magnitude price swings, increasing the risk of significant losses during the final minutes of the trading day.
Read the original report — Economic Times
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