- Securities and Exchange Board of India sees no manipulation in new Closing Auction Session yet
- Data is continuously monitored as market adapts to the new price-discovery mechanism
- Chairman Tuhin Kanta Pandey described CAS as a major micro-structure reform
Securities and Exchange Board of India Chairman Tuhin Kanta Pandey said the market regulator has so far not observed any manipulation in the new Closing Auction Session (CAS), while stressing that data is being continuously monitored as market participants adjust to the new price-discovery mechanism.
Speaking on the CAS framework, Pandey said the new system is a major micro-structure reform aimed at improving the reliability of closing prices and addressing shortcomings in the earlier VWAP-based mechanism.
“CAS is a major micro-structure reform, and we were actually lagging behind in this regard,” Pandey said while speaking to reporters on Wednesday, noting that similar closing auction mechanisms are already used in major global markets.
No manipulation observed in CAS so far
Asked specifically whether SEBI had detected any manipulation during the closing auction sessions, Pandey said, “No, we haven't observed any yet, but we are continuously monitoring the data.”
He noted that the mutual fund participation, which used to be around 5% – 7% at times, has now risen to nearly 20–25%. He also added that proprietary traders tend to be more active on expiry days compared with other trading sessions.
Pandey said SEBI is in discussions with market participants and is welcoming suggestions from stakeholders, including those coming from social media.
Detailed paper on retail derivatives losses
On losses faced by retail investor, Pandey said SEBI will soon release a detailed paper on it.
“We expect to release this document within the next 8–10 days; it will provide a more granular understanding of the participants involved. It is not just retail investors; even sophisticated investors are incurring losses. However, gains and losses are inherent market risks that people must accept,” said Pandey.
However, he said the regulator's concern remains particularly acute around options trading on expiry days, where investors can suffer significant losses despite the perception that such trading is relatively straightforward.
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The SEBI chairman said the new CAS framework is particularly important for passive investing and mutual funds, where a reliable reference price is required for index-based transactions and determining mutual fund NAVs.
Pandey said the CAS is not a “black box” as indicative prices are made available during the session.
He added that the market participants are still adapting to the new system and that greater participation and awareness will be important for the mechanism to work effectively.
He noted the discrepancies in closing prices observed on August 3 have narrowed significantly in subsequent sessions for both the Sensex and Nifty.
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