In short: SEBI has received more than 3,500 comments on its consultation paper on the Closing Auction Session (CAS), which closed for comments on 3 October. Its Chairman, Tuhin Kanta Pandey, says the regulator will go through them quickly and issue a framework soon.
What has happened?
In September, the Securities and Exchange Board of India (SEBI) put out a consultation paper proposing a review of certain aspects of the Closing Auction Session. The paper also covers market timings and the way settlement prices are worked out for derivative contracts.
Speaking at an event organised by the Commodity & Capital Market Participants Association of India (CPAI), Mr Pandey said the response had crossed 3,500 comments. He said SEBI would examine them quickly and move ahead, because in his words, the proposals are "quite clear". Asked whether a circular could be expected soon, he answered yes.
What is the Closing Auction Session?
The CAS is a mechanism that fixes closing prices through an auction process. It has already been rolled out in the equity cash segment. SEBI's review follows concerns about how the CAS affects settlement prices in derivatives.
- What is under review: certain aspects of the CAS, market timings, and the method for deciding settlement prices of index and stock derivatives on expiry days.
- Why now: the review came after the CAS began in the cash segment and concerns arose about its effect on derivatives settlement prices.
- Approach: SEBI says it wants to fix specific issues while hearing different views on how to resolve them. Mr Pandey said the process lets participants suggest alternative approaches.
What does this mean legally?
A consultation paper is not a binding rule. It is a stage where the regulator invites views before deciding. The sources do not say what the final framework will contain or when it will start.
Who is affected?
- Traders in index and stock derivatives: the method for fixing expiry-day settlement prices is part of the review.
- Participants in the equity cash market: the CAS operates in this segment, and market timings are also under review.
What should readers do?
If you trade derivatives, watch for SEBI's circular and the notices your broker or exchange issues. Read the final framework carefully when it appears. Final details may differ from the proposals in the consultation paper.
Other points from the same event
Mr Pandey also spoke on two other subjects. On corporate bond derivatives, he said growth depends on regulatory enablement, technical infrastructure and market participation. He listed steps SEBI has taken to promote exchange-traded systems in the bond market:
- an electronic bidding platform for primary issuances;
- regulation of online bond platform providers; and
- a stronger request-for-quote mechanism for secondary-market deals.
On foreign portfolio investors (FPIs), he said SEBI's role is to ease onboarding and access, while investment decisions depend on returns across countries. SEBI is working with the Reserve Bank of India on further easing of access. It has already allowed FPIs into non-agricultural commodity derivatives.
Frequently asked questions
When will SEBI issue the final CAS framework?
No date has been given. The Chairman said SEBI would look at the comments quickly and go ahead. When asked about a circular, he said one would follow.
Do the proposed changes apply already?
No. The proposals are at the consultation stage. They will matter only once SEBI issues its final framework.
Sources
- ET Markets: Sebi to soon issue framework on Closing Auction Session; receives over 3,500 comments
- TOI Business: Over 3,500 responses on CAS: Sebi to quickly move ahead with proposals