New Delhi, Aug. 10 -- Futures and options (F&O) trading volumes plunged in the first week of the Securities and Exchange Board of India's (Sebi) new closing price discovery mechanism, as thin participation in the closing auction weighed on activity in the derivatives market.

The new mechanism, which replaces the half hour volume-weighted average price used to determine closing prices for 208 stocks available for derivatives trading, is still finding its feet. Market participants attributed the drop to initial uncertainty around the closing auction session (CAS), but expect volumes to improve as more investors and traders participate.

Volume fall

Average traded volumes of index futures, Nifty and Bank Nifty, fell 40% to 69,982 contracts...