The Securities and Exchange Board of India is analysing concerns raised by traders and other market participants about the new Closing Auction Session for futures and options-eligible stocks, but the mechanism is here to stay, SEBI Chairman Tuhin Kanta Pandey said. The regulator is reviewing feedback, expiry-date data and other issues before deciding whether any changes are needed to improve the system.
The CAS took effect on Aug. 3 as part of a change in the way closing prices are determined for F&O-eligible stocks. Continuous trading in these stocks ends at 3:15 p.m., after which they enter the closing auction. Orders are matched during the auction and the resulting price becomes the official closing price.
Non-F&O stocks continue regular trading until 3:30 p.m., while stock and index derivatives trade until 3:40 p.m. The changes were introduced to bring buy and sell orders together during the closing process and improve the way closing prices are discovered.
“CAS is here to stay. If there are issues that can be improved, they will be done soon,” Pandey told reporters on Mondau.
SEBI is now assessing how traders and other market participants have responded to the new mechanism. Pandey said the regulator was speaking to participants, reviewing discussions on social media and examining suggestions received from the market.
“We are talking to participants on the concerns. We are analysing the issues and will soon come with a view,” he said.
Pandey said it was too early to assess the overall response from participants. SEBI will take more time to study the feedback before deciding whether any changes are warranted. “It is too early to say response of participants on CAS,” he said.
The regulator is also examining data around expiry dates as part of its assessment. Pandey said SEBI had not found concerns around tracking errors under the new system. “Expiry date data is also being analysed closely,” he said.
“There are no concerns around tracking errors in CAS,” Pandey added.
The review comes as traders and other participants adjust to a closing process that is different from the earlier system. F&O-eligible stocks stop continuous trading at 3:15 p.m. and then enter the auction, while derivatives remain open for another 25 minutes.
Pandey said the market was still becoming familiar with the CAS and that SEBI would assess the feedback before reaching a view on any changes. “Market is getting educated on CAS now,” he said.
“We will take some time to analyse CAS,” he added.
SEBI is also considering suggestions from participants, Pandey said. While some of the suggestions may be useful, the regulator will assess them before deciding whether they require changes to the mechanism. “Many suggestions on CAS are good, apparently or really we need to see it,” he said.
Pandey also said attracting foreign portfolio investment remained important and that this would be considered as SEBI assesses the CAS. “Attracting FPI is important through CAS,” he said.
On quantum computing, Pandey said organisations first needed to understand the gaps before determining what action was required. “The main issue is understanding gaps. This needs to be ascertained by organisations,” he said.
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