Indian day traders are gearing up for a significant protest, calling for a widespread boycott of stock market trading on August 12. This action is a direct response to the recently implemented Closing Auction Session (CAS), which traders claim is causing substantial financial losses and unfairly favoring large institutional investors.
Why Day Traders Are Protesting CAS
The online campaign, gaining traction across social media platforms, highlights a growing frustration among retail traders. Many allege that the CAS system has led to a noticeable divergence between the closing prices of major indices like Nifty and Sensex, as well as discrepancies in individual stock closing prices. This volatility, they argue, is directly impacting their profitability.
Beyond the CAS, traders are also voicing concerns over what they perceive as frequent rule changes by regulatory bodies and the burden of high taxes, specifically mentioning the Securities Transaction Tax (STT).
One prominent trader on X, with a substantial following, posted: "No trade day on Aug 12. Against STT (securities transaction tax). Against CAS." Another echoed the sentiment, stating, "One day trading boycott against regulations and rising taxes impacting retail traders."
Understanding the Closing Auction Session
The Closing Auction Session was introduced to determine the official closing price for approximately 200 stocks actively traded in the derivatives segment of Indian exchanges. This new mechanism replaced the previous system, which relied on the Volume Weighted Average Price (VWAP) calculated from trades executed during the last 30 minutes of the Continuous Trading Session (CTS).
Under the former VWAP system, large institutional trades executed near market close could disproportionately influence prices, leading to increased volatility, especially on days of index rebalancing or derivative expiry. This often created distortions for passive funds and arbitrage strategies.
SEBI's Rationale for CAS Implementation
The Securities and Exchange Board of India (SEBI) introduced CAS following feedback from global passive funds trading in Indian equities. These funds reported experiencing significantly higher end-of-day price volatility in India compared to most other international markets. Such volatility, SEBI noted, could negatively impact the performance of mutual funds, passive funds, and exchange-traded funds, ultimately affecting retail investors' returns and trading experience.
SEBI's research, coupled with an analysis of practices in other major global jurisdictions (including the United States, Europe, and Asia), indicated that a closing auction session could provide a more stable and less volatile closing price than a VWAP-based method. The regulator asserts that CAS offers all market participants—investors and traders alike—an equal opportunity to contribute to price discovery, pools liquidity into a single auction, and fosters a fair and transparent closing price mechanism.