Sebi to soon issue framework on CAS; receives over 3,500 comments

Sebi is set to release a framework on changes to the Closing Auction Session (CAS) mechanism following receipt of over 3,500 comments on its consultation paper, according to Chairman Tuhin Kanta Pandey. The Securities and Exchange Board of India (Sebi) had solicited public input on its proposal to revise aspects of CAS, including market timings and settlement methodology for derivative contracts.

The deadline for comment submission was October 3. Pandey stated that the regulator would swiftly review the feedback and proceed with the necessary steps, as the proposals in the consultation paper are "quite clear." The regulator expects to publish a circular on the matter soon. Sebi proposed changes to CAS and the methodology for determining settlement prices of index and stock derivatives on expiry days in September.

The review was prompted by concerns over the impact of CAS on derivatives settlement prices after its launch in the equity cash segment. The CAS aims to establish closing prices through an auction process. Pandey highlighted the importance of addressing specific issues while inviting suggestions from market participants on potential solutions.

In addition to CAS, Pandey discussed the growth of the corporate bond derivatives market, emphasizing the need for regulatory enablement, technical infrastructure, and market participation. He noted that Sebi is promoting exchange-traded systems in the bond market by introducing an electronic bidding platform, regulating online bond platform providers, and strengthening the request-for-quote mechanism for secondary-market transactions.

Bond indices and derivatives are considered a major milestone for the segment. Regarding foreign portfolio investor (FPI) flows, Pandey stated that Sebi's role is to facilitate easier access to Indian markets, with investment decisions ultimately driven by returns and opportunities. Sebi is working with the Reserve Bank of India (RBI) to ease FPI access, having already allowed entry to non-agricultural commodity derivatives.

FPI holdings may fluctuate depending on investment opportunities in various markets, according to Pandey.