India’s equity markets are preparing for a significant structural overhaul that is expected to reshape end-of-day trading dynamics and pressure brokerage revenues.
Starting August 3, a new closing auction mechanism will replace continuous trading in the final 15 minutes for futures and options (F&O) stocks, a move brokers warn could curtail high-frequency trading (HFT) and liquidity-providing activities that have historically generated substantial volume around the close.
The change is likely to have a direct impact on the revenue models of many Indian brokers, who have benefited from the high turnover associated with end-of-day arbitrage and liquidity provision.
Zerodha co-founder and CEO Nithin Kamath has cautioned that the overhaul could erode brokerage revenues by 1% to 5%, reflecting the industry’s concern that the new auction format will reduce the number of executable trades during the critical closing window.
The shift marks a broader regulatory effort to improve price discovery and reduce volatility at market close, aligning Indian markets more closely with global standards that favor auction-based closing prices.
However, the transition also highlights the tension between market quality improvements and the commercial realities of brokerage firms that rely on volume-driven fee structures.
As continuous trading is suspended for the final quarter-hour, traders will need to adjust their strategies, potentially leading to a more orderly but less liquid closing process.