New Delhi, Sep 29 (IANS) The Nifty’s indicative closing level briefly plunged 2.2 per cent during the closing auction session on Tuesday, hitting a low of 22,267 as monthly derivatives expiry amplified volatility, before the index recovered. 

Nifty ended the day down only 0.28 per cent at 22,716.20 and the BSE Sensex fell 0.33 per cent to 72,529.07. Bank Nifty slid below 53,300 during the CAS but the index closed only 0.4 per cent lower at 54,259.95.

The sharp swings during the CAS had prompted regulator review after traders said the mechanism was producing abrupt moves in derivatives on expiry days. The CAS framework was introduced on August 3 to determine end‑of‑day prices for futures and options, through a short auction at the end of the trading day.

In a consultation paper released earlier this month, the Securities and Exchange Board of India proposed two alternatives for setting expiry‑day derivative settlement prices.

First method uses trades from the last 30 minutes of regular trading plus the 10‑minute closing auction, and the second one temporarily returns to using only the last 30 minutes of regular trading while excluding the closing auction for at least a year.

SEBI also proposed to stop traders from cancelling orders placed over 1 per cent above or below the reference price. Other proposals include reducing the post-auction derivatives trading window to five minutes from 10 minutes, and stopping the system of publishing an estimated index closing level during the auction.

SEBI Chairman Tuhin Kanta Pandey clarified — earlier in September — that the market regulator is reworking the methodology for determining the closing prices under this framework.

He acknowledged that the rollout of CAS across jurisdictions faced initial challenges, particularly around liquidity but he said that the CAS framework is here to stay.

Initial liquidity was an issue after implementation but liquidity builds up over time, the SEBI chairman said.