Sebi chair rules out CAS rollback; assures commitment to resolving ongoing issues

Mumbai: Securities and Exchange Board of India Chairman Tuhin Kanta Pandey on Monday said the regulator will examine and address issues in the new Closing Auction Session (CAS), while ruling out scrapping the mechanism simply because some market participants want to trade options differently.

“We are talking to participants about the concerns. We are analysing the issues and will soon come with a view,” Pandey said on the sidelines of Sebi’s Symposium on Cyber Defence event held in Mumbai. He reiterated that CAS is here to stay and is looking at concerns raised by traders and other market participants before deciding whether any changes are needed.

The CAS replaced the earlier practice of determining the closing prices based on the average price of trades in the final 30 minutes of regular trading.

Since August 3, the closing prices of 200-odd stocks in the futures and options (F&O) segment have been determined through an auction process lasting about 20 minutes – from 3.15 pm to around 3.35 pm. The move is aimed at making the closing rates less susceptible to the impact of large, price-distorting last-minute orders.

The new mechanism, however, has sparked uncertainty, as losses in F&O trades have sparked protests from traders and other market participants.

The Securities and Exchange Board of India (Sebi) is reviewing feedback from market participants, discussions on social media, expiry-day data and other suggestions before deciding whether any changes are needed to improve the system, said Pandey.

“If there are issues that can be improved, they will be done soon,” Pandey said. Pandey cautioned against creating “unnecessary” concerns around its functioning.”CAS cannot be tracked on a day-to-day basis. Unnecessary issues should not be created in the market. Indicative prices are extremely important for traders,” he said.

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Pandey said Sebi’s consultation paper on the securities lending and borrowing mechanism (SLBM) is expected “very soon”.

Sebi has formed a working group to review the nearly two-decade-old framework. The review is aimed at improving the link between the cash and derivatives markets, strengthening price discovery and reducing settlement-related pressure. Under SLBM, investors can lend their shares to other investors for a fixed period in return for a fee. Borrowers can use these shares for short selling or other market-related needs.