The Securities Exchange Board of India (Sebi) has asked the National Stock Exchange (NSE) to declare the closing prices in the cash segment before the closure of the markets.The move follows requests from the members of the bourse's derivative segment in this regard to get an idea about the pricing while exercising options.
A senior Sebi official said, "We have asked the NSE to declare the closing prices in the cash segment before the closure of the markets."
The cash market closing prices, which are relevant for determining the exercise price, are available to the members of the derivative segment only after they exercise their options.
In such a scenario, traders have no clue at the time of exercising the options about the actual profit/loss they will witness. The closing price is computed as a weighted average of last hour's trades and cash market closing prices are made available during the option exercise time.
The lacuna had surfaced on the NSE as it computes and releases cash market closing prices only after 5 pm, while the exercise time for options expires at 4 pm.
On the Bombay Stock Exchange (BSE), the cash segment closing price is available between 3.40 pm and 3.55 pm. Further, BSE conducts the options exercise session, after the closing prices are available, between 4 pm and 4.30 pm.
If there is transparency about the closing price, it helps to take decision before exercising the options. "Due to unavailability of closing price at the time of exercise, investors do not know what will be the difference or profit which they will get since they are not aware of the closing price," another broker added.
According to another derivatives trader, the only indicator they have at the time of exercise is the last traded price. And the closing price at times is far above or below the last traded price and is prone to manipulation, compounding investors' worries.
In many cases, the quantum of profit gets reduced or is neutralised making it a no-loss, no-gain proposition for the traders.
Adds P K Advani, a leading Mumbai-based broker, "Non-availability of closing prices in the cash market is like shooting in the dark."
J Mehta, another broker, said: "The confusion assumes significance as many a time there is a difference between the last traded price and the closing price in a particular stock on the NSE."
"This difference arises due to price changes, in either direction, during the last few minutes of trading in the cash market," he added.
