SEBI Finds No Manipulation in New Closing Auction System

Markets regulator Securities and Exchange Board of India (SEBI) has not found any evidence of manipulation in the newly introduced closing auction session, its chairman Tuhin Kanta Pandey said on August 12.

Speaking at the Global Commodity Conclave in Mumbai, Pandey said the regulator was open to tweaking the framework if required, but no such changes had been made so far. "No, we haven't done it yet. But we are constantly looking at our data," he said, when asked whether SEBI had detected manipulation during the transition to the new system, as per reports.

This comes after an earlier report by Moneycontrol stated that SEBI was closely examining trades executed during the Closing Auction Session (CAS) on August 3 and 4 to check for possible manipulation. According to the report, the scrutiny followed concerns raised by market participants over the sharp difference between index levels recorded before the auction and those recorded after it on the first two trading days.

Exchanges had provided the requested trading data, and the regulator was analysing it to determine whether the wider gap between pre-CAS and post-CAS index levels was normal, or whether certain trades were placed to influence the closing price, the report added.

On August 3, the Nifty rose by around 201 points between 3.28 pm and 3.30 pm. The next day, it climbed about 152 points between 3 pm and 3.15 pm.

Pandey said such discrepancies had narrowed considerably in more recent sessions, for both the Sensex and the Nifty. He added that SEBI was consulting stakeholders and monitoring feedback, including on social media, to assess how the new mechanism was functioning.

How the New System Works

The CAS is a 15-minute window, held from 3.15 pm to 3.30 pm, during which buy and sell orders are matched to arrive at an equilibrium price. It replaced the earlier system of calculating closing prices using the volume-weighted average price (VWAP) of trades in the last 30 minutes of trading.

Pandey said the current challenge was not a lack of transparency but limited familiarity with the new process among market participants, and that trading systems built around the earlier VWAP method needed time to adapt. He added that a "random close" mechanism had been built into the system to prevent last-minute trades from influencing the final closing price.

Several brokers, including Zerodha and Upstox, have already started showing indicative prices on their web platforms. Other brokers such as ICICI Securities, Groww and Angel One are expected to introduce the feature on their apps by August 14, he said.