SEBI proposes new mechanism to determine stock closing price

MUMBAI: Instead of the current method of determining the average closing price of a stock through the volume-weighted average price, the markets watchdog Securities and Exchange Board of India has proposed an internationally followed practice of close-auction session to determine the closing price of a stock. In a statement issued on Thursday, the SEBI has proposed that CAS may be introduced as a call-auction mechanism to determine the closing price of each stock in the cash segment. "While the VWAP mechanism facilitates determining a fair market closing price based on trading interest in stocks spread through the last half an hour of the trading, it does not enable interested buyers and sellers to trade exactly at the close price of the day,” says the SEBI paper. According to the SEBI, since the closing price is determined by the last half an hour VWAP, some international passive fund houses have said the extant closing price mechanism can cause significant price volatility across stocks as well as have a high risk of large orders not being completed, which then adds to the tracking difference of a passive fund. "To facilitate efficient maintenance of records and documents relied on by merchant bankers while conducting their due diligence on public issues, stock exchanges have set up an online document repository platform which would enable merchant bankers to upload and maintain these documents electronically.