The Securities and Exchange Board of India (SEBI) is set to issue a consultation paper on the Closing Auction Session (CAS) on Saturday, with the regulator likely to propose changes to the methodology used to determine settlement prices for derivative contracts, a top official told NDTV Profit.
The consultation paper is expected to address concerns around the determination of derivative settlement prices on expiry days under the newly introduced CAS mechanism. The proposal is likely to be taken up at the upcoming SEBI Board meeting scheduled for Sept. 24.
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SEBI is not looking to roll back the closing auction mechanism itself. Instead, the regulator is expected to focus on refining how settlement prices for derivatives are calculated, particularly on expiry days.
SEBI Chairman Tuhin Kanta Pandey had earlier said that the regulator was examining concerns raised by market participants and would come up with solutions.
"CAS is here to stay," Pandey said, adding that SEBI would propose solutions to address concerns around the mechanism.
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The latest move indicates that the regulator could retain the broader CAS framework while making targeted changes to its interaction with the derivatives market.
What Is CAS?
The Closing Auction Session came into effect on August 3 as part of changes to the manner in which closing prices are determined for stocks eligible for futures and options trading.
Under the new framework, continuous trading in F&O-eligible stocks ends at 3:15 pm. These stocks then enter the closing auction, where buy and sell orders are matched and the resulting price becomes the official closing price. Non-F&O stocks continue to trade normally until 3:30 pm, while stock and index derivatives trade until 3:40 pm.
The mechanism was introduced to bring buy and sell orders together during the closing process and improve price discovery at the end of the trading session.
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