CAS is the new system exchanges use to work out the closing price of a stock, replacing the old method of simply taking the last half hour of trade. It’s meant to fix the mismatch, or “tracking error,” between a stock’s price and its index. But since it went live on August 3, both cash and options volumes have taken a hit — some measures show premium turnover and contracts traded down 10-20% from July.
Ramamurthy said the shortfall comes down to one thing: not enough people showing up to trade in the 15-minute CAS window.
At BSE, that window is currently seeing an average of just ₹10-20 crore in turnover, occasionally spiking to ₹60-90 crore on unusual days. “It has to be much more participative,” he said, adding that a closing auction only works properly when there’s real liquidity on both the buy and sell side.
What dealers are asking for
BSE has been running dealer meets to get a sense of what’s holding people back, and Ramamurthy said a fair bit of feedback has come in — some of it well thought through, some more off-the-cuff. A few ideas kept coming up:
- De-link the F&O expiry settlement price from CAS. Some dealers want the exchange to go back to the earlier method used to settle derivative contracts, rather than using the price set in the closing auction.
- Roll it out gradually, the way T+1 settlement was done. Instead of applying CAS to all stocks at once, dealers suggested starting with smaller stocks outside the top 500, ironing out issues, and then extending it to the rest.
- Rework the price band and the time gaps within the session, which some dealers feel are encouraging erratic order placement.
- Restrict order changes near the cut-off. One suggestion was to allow only fresh orders in the closing minutes, with no modifications or cancellations. Another was to allow price changes but not quantity changes just before the cut-off.
Ramamurthy said BSE isn’t picking sides on which of these ideas are right. “We are collating it and then we will be engaging with the regulators as well because this is an important thing for the market,” he said.
On whether the worst is behind the market, he was cautious. CAS was introduced right in the middle of monthly options expiry and MSCI index rebalancing, he said, which makes it too early to call a trend. He also pointed out that global and domestic factors — from oil prices to broader market mood — make it hard to pin the volume drop on CAS alone.
Bank guarantee rules could create temporary pressure
BSE is also assessing the impact of changes to RBI rules around bank guarantees. Ramamurthy said it is difficult to isolate the effect of the regulation because trading volumes are influenced by several global and domestic factors at the same time.
The impact could become more visible as legacy bank guarantees expire. He said proprietary trading desks may either need to demonstrate their role as market makers to retain leverage benefits or arrange alternative capital, which could potentially increase trading costs and affect bid-ask spreads.At the same time, a growing market could help absorb some of this impact, he said.
Ramamurthy clarifies NSE self-listing reports
On reports that the National Stock Exchange (NSE) was seeking permission to list its shares on its own exchange, Ramamurthy said self-listing is not permitted under the current regulatory framework.
Ramamurthy said BSE’s compliance team had checked with NSE on whether it planned to seek such permission and file an addendum to its Draft Red Herring Prospectus (DRHP). According to him, NSE responded that the media reports were speculative and baseless and that it would not file any fresh addendum on the matter.
For the entire discussion, watch the accompanying video
