BSE Negotiates With Traders to Boost Closing Auction Liquidity

BSE Ltd. is negotiating with high-frequency traders, proprietary traders, and retail investors to increase liquidity in its closing auction system. Launched on August 3 to align with global market standards, the system has suffered from thin participation, which triggered sharp price swings during recent index rebalancing.

CEO and managing director Sundararaman Ramamurthy stated that the bourse is considering minor changes to make the system more efficient and encourage participation. These liquidity struggles coincide with a decline in index options premium turnover, which hit an 18-month low in August.

Market reaction has been negative, with BSE shares falling more than 3% on Wednesday as part of a nearly 19% decline since the start of August. Analysts from Jefferies Financial Group Plc noted that the closing auction mechanism has had negative implications for both the bourse and Billionbrains Garage Ventures Ltd., the parent company of broker Groww.