BSE SHARES FALL AS CLOSING AUCTION SESSION WEIGHS ON VOLUMES

Shares of BSE Ltd fell more than 4% from the day’s high on September 2 after the exchange acknowledged that its newly introduced Closing Auction Session (CAS) has resulted in lower trading volumes. BSE said participation in the CAS has been weaker among high-frequency trading firms, proprietary traders and retail investors, highlighting the need for broader participation in the new mechanism. Reports have suggested that NSE could trade on its own exchange under the “permitted to trade” category after its listing on BSE. According to a note by PL Capital, this could potentially impact BSE’s FY27 earnings by around 1–2%, based on its sensitivity analysis, assuming BSE’s cash-market share does not improve further. Introduced on August 3, the CAS is a short end-of-day auction in which buy and sell orders are matched to determine a stock’s official closing price. Similar mechanisms are used in major Asian markets, including China, Taiwan, Hong Kong and South Korea. However, liquidity during the roughly 20-minute auction window has remained thin and is largely dominated by institutional participants. Exchange data showed that CAS trades accounted for less than 1% of daily cash-market turnover, while volumes were less than one-third of those recorded under the previous closing-price methodology. The limited participation also means that relatively small buy or sell orders can have a disproportionately large impact on benchmark indices and closing prices, adding to concerns around the effectiveness of the new system.