3 days ago
UK Sinha Says SEBI Needed More Preparation for Closing Auction
SEBI introduced a new auction process to decide some stocks’ closing prices.
The process starts after regular trading ends at 3:15 p.m.
It was introduced on August 3 for stocks linked to futures and options trading.
Some market participants say the process has caused unusual price swings and liquidity concerns.
They have sent suggestions to SEBI, including asking it to reverse the change.
UK Sinha said SEBI could have prepared and tested the system more thoroughly.
However, he believes the process will eventually become more stable.
He also said manipulation may now be easier to detect.
Sinha warned that ordinary people can face serious risks when trading leveraged derivatives.
Former SEBI chairman UK Sinha said the closing auction session needed more preparation, consultation, and beta testing.
The closing auction session began on August 3 for stocks in the futures and options segment.
Continuous trading now ends at 3:15 p.m., followed by an auction that determines official closing prices.
Market participants have raised concerns about liquidity and sharp price movements, with some suggesting the framework be rolled back.
Sinha said the mechanism should stabilise, while warning that leveraged derivatives trading remains risky for individual investors.
- Who
- Former Securities and Exchange Board of India chairman UK Sinha, SEBI, exchanges, and market participants.
- What
- The closing auction session has faced concerns over preparation, liquidity, price swings, and possible manipulation.
- Where
- In India’s securities markets.
- When
- The mechanism began on August 3; the article was published on August 30, 2026.
- Why
- The session determines official closing prices for certain stocks, which are used in derivatives settlement and can affect market stability.
Sinha and mechanism supporters
Market participants and critics
Whether the rollout was adequately prepared
Sinha and mechanism supporters
UK Sinha said preparation could have been wider, but he is not worried and expects the mechanism to stabilise.
Market participants and critics
Market participants and experts have questioned the rollout and raised concerns about its operation, including liquidity problems and sharp price movements.
Whether the framework should remain in place
Sinha and mechanism supporters
Sinha supported allowing the closing auction mechanism to settle, saying manipulation attempts may be easier to identify under it.
Market participants and critics
Some market participants have written to SEBI with suggestions that include rolling back the framework.
How to address derivatives risks
Sinha and mechanism supporters
Sinha backed SEBI’s efforts to curb excessive derivatives speculation and said investor suitability checks could help protect individuals from leveraged trading.
Market participants and critics
The market structure remains vulnerable because large derivatives positions are settled using prices discovered in a comparatively smaller cash market, creating concerns about stability.
Key facts
- Mechanism
- Closing auction session (CAS)
- Launch date
- August 3
- Affected securities
- Stocks in the futures and options segment
- Regular trading ends
- 3:15 p.m.
- Testing timeline
- The exchanges held a CAS-specific mock trading session on August 1, two days before launch.
- Main concerns
- Liquidity, sharp price swings, manipulation, and the relationship between derivatives positions and the smaller cash market.
- Recent regulatory action
- SEBI acted against entities accused of placing large cash-market auction orders to benefit from derivatives expiry positions.
Quotes
UK Sinha
Former chairman of the Securities and Exchange Board of India
“An individual who is not an expert in the market and whose main profession is not investing, he may be a doctor, engineer, whatever he may be, he should not directly invest in the market”
thehindubusinessline.com
“Perhaps there could have been wider preparation, but it will eventually stabilise. But if there is anybody trying to manipulate, their chances of getting caught are very high now”
thehindubusinessline.com
Sources
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