SEBI has stepped up talks with trading firms and mutual funds over concerns with its new closing auction system.

Officials at the Securities and Exchange Board of India met market makers, domestic mutual fund managers and stock brokers this week to gather feedback.

The goal was to figure out whether the mechanism, launched on 3 August, needs a review. SEBI Chairman Tuhin Kanta Pandey addressed the topic at a public event on Wednesday.

He said the regulator is open to tweaking the system and is actively collecting input from market participants. The new system replaced an older method that relied on volume-weighted average prices during the final 30 minutes of trading.

The switch aimed to improve price discovery and cut down on market manipulation, and it also brought India’s market structure closer in line with major global exchanges.

The rollout hasn’t gone smoothly though. Some high-frequency trading firms said they couldn’t borrow stocks through India’s still-developing securities lending market, which limited how much they could take part in the auction.

A few brokers have floated a different idea. They’ve suggested reverting to the old system on rebalancing days for passive funds, at least until liquidity improves. A bigger test is coming up too.

Brokers who handle trades for foreign funds are worried about how the new system will cope later this month, when global passive funds rebalance their portfolios following MSCI’s quarterly index changes.

The numbers already show some strain. Average turnover during the auction window has dropped 40% compared with the final 15 minutes of trading under the old system.

Average traded volume of index options fell 27% to 268 million contracts across the 4 August and 11 August settlement days, down from July’s weekly average.

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