SEBI Chief Warns Of Strict Action Against Closing Auction Session Manipulation

On August 19, SEBI Chairman Tuhin Kanta Pandey cautioned that the market regulator would take swift and decisive action against any attempts to manipulate the newly implemented Closing Auction Session (CAS) mechanism. In remarks made at the FICCI Capital Markets Conference in Mumbai, Pandey stated that SEBI possesses enhanced capabilities to identify manipulation in CAS compared to the previous volume-weighted average price (VWAP) system.

Pandey explained that the new CAS system is designed to make it easier to detect manipulation, which justified its implementation. He emphasized that the Closing Auction Session is intended to promote transparency in the market. However, he warned that any attempts to manipulate the closing process or undermine the mechanism's credibility would result in immediate action from SEBI.

The chairman also cautioned against any misuse of the CAS mechanism or attempts to create doubts about its integrity. SEBI introduced the 20-minute Closing Auction Session earlier in the month to improve transparency in determining stock closing prices. During this period, exchanges collect buy and sell orders and determine the closing price at the level where the greatest number of shares can be traded.

This system supersedes the earlier method, where closing prices were based on the average price of trades in the final 30 minutes of regular market hours.

While the shift to CAS aims to create a fairer and more transparent closing price, it has also raised concerns among market participants regarding reduced participation and potential impacts on trading strategies and profitability. SEBI's warning indicates that the regulator will closely monitor the new mechanism and take prompt action if it identifies improper attempts to influence closing prices.