2 weeks ago
SEBI Warns Immediate Action Against Closing Auction Manipulation
India has started using a new way to decide the final price of stocks each day.
It is called the Closing Auction Session, or CAS.
During 20 minutes, buyers and sellers place orders, and the price is chosen where the most shares can be traded.
SEBI says this system is meant to make prices clearer and easier to monitor for manipulation.
The regulator warned that anyone who tries to manipulate CAS or damage its credibility could face quick, strict action.
Some traders have reported problems while adjusting, including gaps between earlier prices and final prices and lower participation.
SEBI says participation is improving and is studying the remaining difficulties.
The regulator is also reviewing small-company IPO rules, global fund-management requirements and safe-use guidelines for artificial intelligence in markets.
SEBI Chairman Tuhin Kanta Pandey warned of immediate, strict action against manipulation of the new Closing Auction Session.
Introduced on August 3, CAS uses a 20-minute auction to set closing prices where the maximum number of shares can be traded.
Pandey said CAS participation is improving, including among mutual funds and proprietary traders, while SEBI examines remaining participation constraints.
Market participants have reported transition concerns, including price gaps, reduced participation, trading difficulties and possible losses.
SEBI is reviewing SME IPO rules, easing portfolio-management requirements for global fund management from India, and preparing guidance for responsible AI use in markets.
- Who
- SEBI Chairman Tuhin Kanta Pandey, the Securities and Exchange Board of India, and market participants.
- What
- SEBI warned that attempts to manipulate or discredit the Closing Auction Session will bring strict and immediate action.
- Where
- The warning was given at or on the sidelines of a FICCI Capital Markets event in Mumbai.
- When
- Pandey issued the warning on August 19; CAS was introduced on August 3.
- Why
- CAS was introduced to improve transparency and efficiency in determining stock closing prices, while SEBI seeks to prevent manipulation.
SEBI’s Rationale
Market Participants’ Concerns
Transparency and market integrity
SEBI’s Rationale
SEBI says CAS was introduced to improve transparency and that it can identify manipulation more effectively than the previous VWAP system.
Market Participants’ Concerns
Some participants are concerned that manipulation or misuse of the new mechanism could affect its credibility and market outcomes.
Participation and transition
SEBI’s Rationale
Pandey said participation is increasing, including among mutual funds and proprietary traders, while SEBI examines constraints and encourages participants to adapt their technology and understanding.
Market Participants’ Concerns
Participants have raised concerns about reduced or uneven participation, gaps between pre-auction prices and final settlements, and difficulties during the transition.
Trading impact
SEBI’s Rationale
SEBI presents CAS as a reform intended to improve closing-price discovery and execution efficiency, particularly for large orders.
Market Participants’ Concerns
Market participants have questioned its effect on trading strategies, profitability and possible losses.
Key facts
- Regulator
- Securities and Exchange Board of India (SEBI)
- Chairman
- Tuhin Kanta Pandey
- CAS launch
- The Closing Auction Session was introduced on August 3.
- Auction duration
- The session lasts 20 minutes.
- Price setting
- The closing price is set at the level where the maximum number of shares can be traded.
- Previous method
- The earlier system used the volume-weighted average price of trades during the final 30 minutes of regular market hours.
- Other regulatory initiatives
- SEBI is reviewing the SME IPO framework, proposing easier portfolio-management requirements for global fund management from India, and preparing responsible AI and machine-learning guidelines.
Quotes
Sebí Chairman Tuhin Kanta Pandey
Chairman of the Securities and Exchange Board of India
“We want to make one thing clear, that if people manipulate the CAS system, then we will take strict action and do it immediately. CAS is for transparency. But if someone thinks that we will manipulate the CAS to defame it, then they are mistaken.”
indianexpress.com
“"We want to make one thing clear: if people do manipulation in CAS, then we will take strict action and do it immediately."”
businesstoday.in
Sources
SEBI Chief Warns Of Strict Action Against Closing Auction Session Manipulation
Any attempt to defame CAS by manipulation will be dealt with sternly, warns Sebi’s Pandey
Sebi chief has warned of strict action against market manipulators. Here's why
SEBI chief warns against manipulation of new closing auction system, says strict action will follow
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