SEBI Chief Says Closing Auction Session Is Here To Stay, But Changes Could Follow

Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey has made it clear that the regulator does not intend to withdraw the recently introduced Closing Auction Session (CAS), even as it evaluates concerns raised by brokers, traders and other market participants. The new framework, which came into effect on August 3, has generated debate among sections of the market. Participants have stressed difficulties with the system, with some of the criticism also spilling onto social media.

Pandey said SEBI was examining the feedback and engaging with market participants, but indicated that it was too early to announce whether any specific modifications would be made.

"'The CAS is here to stay for sure, only we will see if there are certain constraints or certain issues that we can improve, certainly we will improve," Pandey told reporters on the sidelines of a cybersecurity event organised at the SEBI-promoted National Institute of Securities Markets.

SEBI Rules Out Scrapping New Closing Auction System

The regulator's position is that the CAS will remain part of India's market structure. At the same time, SEBI is not dismissing concerns surrounding its implementation. Pandey said suggestions from participants were being examined, including feedback posted on social media platforms. However, he indicated that the regulator would not respond individually to every criticism directed at the new mechanism.

"We are looking at all the suggestions, I have myself seen a number of suggestions which have come from social media. Our teams have gone through it, they are discussing with the participants," the SEBI boss said.

Why CAS Has Faced Pushback From Participants

The Closing Auction Session was introduced on August 3 as a significant change to the way closing prices are determined in the market. Its introduction has led some participants to flag operational and trading-related challenges.

Pandey said some of these difficulties could ease as market participants become more accustomed to the new mechanism.

He also highlighted the fact that several participants continue to rely on systems built around the older volume-weighted average price framework. According to the SEBI chairman, continued dependence on those legacy processes could prevent participants from taking full advantage of the CAS framework.

The regulator is therefore also looking at the adjustment period involved in moving market participants from familiar systems to a new structure.

SEBI Says Market Needs Time To Adapt

Pandey indicated that resistance to CAS could partly reflect the challenge of adapting to a process that differs from what market participants have used for years. The SEBI chairman has previously pointed out that comparable auction mechanisms are already followed in several international markets and that India adopted the framework relatively late.

On Monday, he questioned whether market participants had invested enough time and effort in understanding the new system.

"When you have something going on for years and years, they feel that change will never come. We do not put in energy into learning a new system," he said.

His comments underline SEBI's view that the transition may require participants to familiarise themselves with the new process instead of immediately reverting to established practices.