SEBI To Act ‘Immediately’ Against CAS Manipulation, Chairman Tuhin Kanta Pandey Says

SEBI Chairman Tuhin Kanta Pandey on August 19 warned market participants that the regulator would take strict and immediate action against attempts to manipulate the newly introduced Closing Auction Session (CAS).

Speaking on the sidelines of the FICCI Capital Markets Conference in Mumbai, Pandey said SEBI has greater ability to identify suspicious activity under the new closing-price mechanism compared with the earlier VWAP-based system.

SEBI Warns Against CAS Manipulation

Pandey said the regulator wanted to make its position clear: any manipulation of the CAS would invite swift regulatory action.

He argued that the new mechanism provides SEBI with better tools to identify unusual trading behaviour than the previous system.

According to Pandey, the regulator can detect potential manipulation in the CAS relatively more easily than it could under the earlier VWAP-based method.

He also cautioned market participants against deliberately attempting to manipulate the mechanism in a way that could undermine confidence in the new system.

Pandey said the primary objective of CAS was to improve transparency in determining closing prices.

How The Closing Auction Session Works

The CAS is a separate 20-minute trading session introduced earlier this month to determine the closing price of stocks.

During the session, exchanges collect buy and sell orders and arrive at a price at which the maximum possible volume can be executed.

The mechanism replaced the earlier approach, under which a stock's closing price was based on the volume-weighted average price of trades during the final 30 minutes of regular market hours.

The new system was introduced with the aim of creating a more transparent closing price and improving execution for large orders.

However, the change has also triggered concerns among some traders and market participants over lower participation and potential losses resulting from the new methodology.

SEBI Reviews Small IPO Rules

Separately, Pandey said SEBI is conducting a comprehensive review of regulations governing small-company IPOs.

He said certain requirements, including market-making obligations, could increase the cost of raising funds for smaller companies.

“A comprehensive review is underway,” Pandey said, adding that SEBI was examining how the framework could be improved.

The regulator is also reviewing its delisting regulations, although Pandey did not provide further details on the proposed changes.

India Seeks To Attract Global Fund Management

SEBI is also looking to encourage more global fund-management activity from India.

Pandey said proposed changes to portfolio manager regulations could make it easier for investment decision-makers to conduct trading activities from India while managing global funds.

The proposed regulatory changes are part of a broader effort to develop India's capital markets and make the country a more attractive base for international investment activity.

For the CAS, meanwhile, SEBI's latest warning signals that the regulator intends to closely monitor the new closing-price mechanism as market participants adjust to the system.