India’s newly introduced auction-based system to determine end-of-day prices for over 200 stocks continues to produce unexpected swings nearly a month after its launch.
BSE Sensex index briefly plunged about 3% during the 20-minute closing auction Thursday, renewing concerns over thin liquidity and the potential for manipulation during the window.
Two weeks ago, an incident on the BSE Ltd. exchange had prompted the securities regulator to ban two firms, including a unit of JPMorgan Chase & Co., from the market for allegedly manipulating the auction system.
The overhaul was intended to bring India in line with major global markets and reduce the potential for manipulation. Instead, its early rollout has highlighted some of the challenges involved in shifting price discovery to an auction-based method.
