SEBI chief warns against manipulation of new closing auction system, says strict action will follow

Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey cautioned against manipulation of the newly introduced Closing Auction Session (CAS) system, warning that strict action would be taken if such manipulation occurs. Pandey emphasized the CAS mechanism is designed for transparency, and any attempts to defame it through manipulation will be dealt with strongly.

The CAS has been in the spotlight due to low trading volumes as traders get accustomed to the system, which has resulted in significant discrepancies in the closing prices of the Nifty 50 and Sensex indices. The regulator will release data for the futures and options (F&O) segment for 2025-26 on August 20, providing insights into the effectiveness of recent measures aimed at curbing excessive volatility in the segment.

These measures include increasing lot sizes, limiting the number of expiries per exchange, and raising the Securities Transaction Tax on the segment in the recent Union Budget. Earlier, a study by SEBI indicated that over 90% of trades by retail investors resulted in losses, leading some to take extreme measures, such as contemplating suicide.

Pandey also revealed that SEBI is working on measures in technology, corporate bonds, disclosure norms, and foreign investor participation as part of the next phase of growth for the Indian markets. In the technology domain, SEBI plans to issue guidelines for the responsible use of AI and machine learning, which will include a "Kill Switch" and "Humans in the Loop" controls, as well as data controls.

The regulator is also reviewing the framework for the IPOs of small and medium enterprises, focusing on issues like market making that increase costs for small company IPOs. Additionally, SEBI is exploring ways to support global fund management activity from India, such as allowing portfolio management services to invest in overseas securities and unlisted companies.