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India's SEBI Targets Closing Auction System Over Manipulation Concerns
India's Securities and Exchange Board (SEBI) is reviewing its equity market closing auction system, which has drawn criticism from brokers and exchanges for alleged manipulation. The regulator plans to revise the current framework to enhance market…
India's Securities and Exchange Board (SEBI) announced a review of the equity market's closing auction system, responding to concerns from brokers and exchanges regarding potential manipulation. The current auction mechanism, which determines settlement prices for derivatives, has faced criticism for allowing unusual price movements in the final trading minutes. SEBI's objective is to implement changes that improve market fairness and transparency.
Under the existing framework, the closing auction session occurs between 3:40 PM and 4:00 PM local time. This period is critical for setting the final price of securities, which then serves as the settlement price for futures and options contracts. Critics argue that concentrated trading activity during this short window can be exploited, leading to artificial price spikes or drops that do not reflect genuine market sentiment.
The regulator plans to introduce new rules for the closing auction, drawing on recommendations from market participants and internal analysis. These revisions are expected to address the identified vulnerabilities and reduce the scope for manipulative practices. The updated system aims to create a more robust and equitable price discovery process for both spot equities and derivative instruments, ensuring greater stability at market close.
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