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The Closing Auction Session (CAS) is "here to stay" as a core market reform, SEBI Chairman Tuhin Kanta Pandey stated on Monday, while confirming the regulator is open to making operational tweaks to refine the mechanism, if needed.
Speaking to media on the sidelines of the Symposium on Cyber Defence at SEBI's NISM Campus in Navi Mumbai, Pandey addressed market friction and social media backlash surrounding the recent CAS rollout. Defending the mechanism, Pandey emphasised that CAS aligns Indian equities with global benchmarks. "Internationally, market participants have really welcomed CAS because execution at the closing price is bound to rise, replacing the earlier practice where prices were derived based on VWAP (Volume-Weighted Average Price)," Pandey said. Acknowledging initial trading disruption, Pandey attributed the friction to legacy infrastructure rather than structural flaws. "Some of the concerns being raised stem from the fact that certain market players have not updated their own internal systems yet," Pandey explained. "Remnants of historical systems built around event-driven setups are still in place. Traders using specific algorithms didn't immediately see the typical benefits they were used to," he added. Despite initial teething issues, Pandey asserted that the core framework remains firm. "CAS is definitely here to stay. That doesn't mean it's rigid--we are looking at whether there are supplementary adjustments or minor tweaks we can introduce to improve the mechanism," he added. Addressing criticism regarding market communication and social media noise, Pandey noted that the industry had sufficient advance notice. "CAS was actually announced quite a while in advance. We have repeatedly spoken about how the price divergence between 3:15 PM and 3:30 PM has been narrowing gradually, even though it widened again on specific expiry days," he said. The SEBI Chairman further said, "Trading ecosystem players know that rumours often circulate, but we don't need to repeat the same explanations endlessly. The core system is well-understood, and we are continuously evaluating how to refine the framework,". Pandey reiterated that SEBI's priority remains long-term stability, reducing tracking error for passive funds, and safeguarding price discovery. Addressing a query from ANI News on CSCRF compliance, "How is SEBI helping smaller market entities manage high costs for mandatory M-SOC onboarding?", Pandey outlined targeted support for smaller intermediaries. "We are fully aware of the cost pressures on smaller market entities. To mitigate this, SEBI has enabled Market Infrastructure Institutions like exchanges to host and maintain shared Market SOCs," Pandey said. "This allows smaller brokers and sub-brokers to participate in a shared infrastructure setup, significantly reducing their individual compliance and technology burden," he concluded. (ANI)
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