The call auction mechanism introduced during the pre-opening session on a pilot basis by the domestic stock exchanges has started attracting participation from proprietary and retail investors, but institutional investors still prefer to stay away.
According to market participants, the capital market regulator, Sebi, is in favour of continuing with the newly introduced call auction mechanism. When contacted, a senior Sebi official said, ?any system which has the potential to enhance the efficiency and transparency in the market should be given more time so participants can get accustomed to it.? On October 18, the stock exchanges had started the pre-opening session and Sebi earlier had mentioned that the framework for call auction will be reviewed three months after its introduction.
Though the pre-open session witnesses trade orders worth less than Rs 10 crore on a daily basis on most occasions, due to lack of participation from institutional investors, exchange officials are still confident about the system picking up momentum in due course once investors become familiar with the new system. The exchanges have already started holding consultation with various market participants to take their feed backs ahead of a review by the capital market regulator Securities and Exchange Board of India (Sebi) this month on the working of the system.
A senior official at one of the exchange though admitted that the volume of trade during the markets pre-opening session has not picked up significantly as was anticipated earlier. ?There is a good amount of interest and participation from retail and proprietary traders, but institutional investors are largely staying away,? he said while adding that the exchange is continuing with their efforts in creating awareness among the various market participants.
On most occasions, total trade value placed on the system to determine an auction price (the opening price) was not more than Rs 10 crore. This is as compared to Rs 450 crores worth of trades for (Nifty 50 constituents) done on the NSE’s cash segment prior to the introduction of the call auction system.