Retail traders in India are observing a 'No Trade Day' on August 12 to protest the newly introduced Closing Auction Session (CAS), higher securities transaction tax, and a series of changing market rules that they say have disrupted trading strategies and increased market volatility.

The grassroots campaign has gained traction among retail participants who have expressed frustration over the divergence in closing prices since CAS was implemented. Traders argue that the new closing mechanism has created unpredictable price movements during the final minutes of the trading session, making it difficult to execute strategies that rely on stable closing prices. The protest comes at a time when India's retail investor base has expanded rapidly, with tens of millions of demat accounts added in recent years, amplifying the impact of any rule change on daily trading volumes.

What Is CAS?

The Closing Auction Session is a mechanism introduced by Indian stock exchanges to determine a stock's closing price through an auction process rather than the previously used weighted average price method over the last 30 minutes of trading. Under the CAS framework, buy and sell orders are collected during a designated closing period and matched at a single equilibrium price, a system modeled on practices already used in several major global markets including exchanges in the United States and London.

Closing prices serve as benchmarks for mutual fund net asset value calculations, derivative contract settlements, and index tracking, making the accuracy and stability of the closing price mechanism significant beyond intraday trading. The Securities and Exchange Board of India (SEBI), India's capital markets regulator, has stated that CAS is intended to improve price discovery and reduce manipulation at the close. SEBI has expressed confidence that the system will improve as participation increases, despite widespread confusion among market participants during the initial rollout phase.

Trader Backlash and Calls for Boycott

Since CAS was introduced, numerous retail traders have reported that established strategies — particularly those involving options hedging and index-based trades executed near the close — have been upended by sharp price swings during the auction window. The 'No Trade Day' campaign is the most visible form of protest to date, with participants urging fellow traders to refrain from placing any orders on August 12 as a show of dissent.

The protest also encompasses broader grievances, including increases in the securities transaction tax that took effect following the July 2024 Union Budget and what traders describe as a pattern of frequent, poorly communicated rule changes by exchanges and regulators.

Industry Response

Market intermediaries and trading associations have flagged the transition issues to exchanges, requesting clearer guidance and potentially a longer adjustment period. The concerns center on whether the initial implementation problems are short-term teething issues or indicative of structural flaws in the CAS design.

Source: Economic Times Markets