Sebi sees no manipulation in new CAS despite participation concerns

Securities and Exchange Board of India (Sebi) Chairman Tuhin Kanta Pandey has stated that the regulator has not observed any manipulation in the new closing auction sessions (CAS) launched on August 3, despite rising concerns. The CAS, a significant microstructure reform, aims to determine closing price levels and is being closely monitored by Sebi.

Pandey emphasized that a reliable closing price is essential for index calculations, passive investments, and mutual fund net asset values (NAVs). In the past Volume-Weighted Average Price (VWAP) system, a small trade near the close could potentially influence the closing price. However, with the CAS, this possibility of manipulation has been eliminated.

Pandey acknowledged that losses in derivatives trading are not limited to retail investors, as even sophisticated investors can incur losses. He highlighted that gains and losses are inherent market risks that participants must accept. The regulator's primary concern lies in options trading on expiry days, where investors may suffer significant losses despite assuming the process is straightforward.

Noting that the industry is still finding its footing, Pandey stated that the regulator is in dialogue with all market participants. He believes that all stakeholders are adjusting to the new system and that there are more positive aspects to the CAS. Sebi will release a detailed paper within the next 8-10 days, providing a granular understanding of the participants involved and their trading outcomes.