Market Closing Auction: Sebi asks brokers to accept orders in first five minutes 

Securities and Exchange Board of India is understood to have asked stock brokers to accept orders from investors during the initial five minutes of the closing auction session (CAS).

The CAS begins at 3.15 pm and ends at 3.35 pm. The initial five minutes is considered as the transition period for the calculation of reference price and the transition to the auction.

The move to allow brokers to accept orders during the initial five minutes is expected to make the transition from regular trading to the CAS smoother and also improve price discovery, say experts.

Dhiraj Relli, the MD and CEO of HDFC Securities said that they will start accepting aftermarket orders between 3.15-3.20, starting September.

"The move is expected to improve price discovery and liquidity in CAS," he said.

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Brokers may have to make necessary changes to their trading systems so that they can accept these orders during the five minute transition.

CAS was introduced just three weeks ago for efficient discovery of closing stock prices. It replaced the the earlier Volume Weighted Average Price System (VWAP).

The way it works is continuous trading ends at 3.15pm. The official closing price is then determined by pooling buy and selling orders and matching trades at a common price.

Placement, modification and cancellation of market orders allowed 3.20 pm to 3:25 pm. For limit orders the placement, modification and cancellation is possible till around 3.30 pm.

However, since the CAS was introduced, there were reports of unpredictability in index and stock price moves. Traders had pointed to noticeable gaps in pre-auction price levels and final settlements.

Sebi chairman Tuhin Kanta Pandey said on Wednesday that participation in the CAS was increasing and the regulator was looking at any constraints in participation.

He has earlier said that when new things are launched, it takes time for all people to understand.