SEBI’s CAS rollback: Brokers welcome VWAP return, but market veterans flag risks
While brokers welcome the revised settlement mechanism, concerns persist over policy uncertainty, market integrity and whether the closing auction framework was given sufficient time.
SEBI has rolled back its decision to introduce the closing auction session (CAS) framework, with brokers welcoming the return of the volume-weighted average price (VWAP) reference price for derivatives settlement. However, market veterans have expressed concerns about the timing of the reversal and the potential risks it may pose to market credibility.
The regulator's decision comes just months after the CAS framework was introduced, amid concerns that frequent policy reversals could undermine investor confidence. While brokers believe the VWAP system benefits proprietary desks, market veterans argue that the CAS framework aimed to promote liquidity and prevent gaming of the system, which could damage market integrity.
SEBI received over 20,000 responses to its consultation process, and the Association of NSE Members of India welcomed the move, praising SEBI's engagement with stakeholder concerns. However, Kejriwal expects the regulator to continue refining the framework over the next year before arriving at a more definitive solution.
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