CAS here to stay, SEBI says as it reviews concerns
What's the story
The Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey has said that the Closing Auction Session (CAS) is here to stay. His statement comes amid concerns raised by traders and other market participants over the new system. CAS was launched on August 3, and since then, it has been triggering sharp moves in the last few minutes of trading.
Implementation concerns
Addressing concerns related to CAS implementation
Pandey said that SEBI first needs to understand the "deformities" in the implementation of CAS and how they can be addressed.
He noted that most concerns are related to legacy systems that have not been updated for the new framework.
"We are talking to participants about the concerns. We are analyzing the issues and will soon come with a view," said Pandey.
"CAS is here to stay with higher participation and resolving existing issues key to improving the system."
System objectives
What is the closing auction session?
The new system is used to determine the official closing price of stocks in the futures and options segment.
Under the previous system, this was based on the volume-weighted average price of trades during the last 30 minutes of continuous trading.
CAS replaced this with a separate auction window, bringing India's closing price discovery process closer to global practices.
Transition challenges
Transition to CAS not without challenges
The transition to CAS hasn't been smooth. Traders have flagged unusual moves in Nifty stocks during the auction window and divergence between major indices.
The new auction system has led to sharp equity price moves in the last minutes of trading, creating challenges for brokers, exchanges, and fund managers.
Despite these issues, SEBI has not found any evidence of manipulation in the new closing auction session.
System benefits
Issues arising from the transition
CAS is expected to provide a cleaner closing price for stocks, mutual fund NAVs, index calculations, and derivatives settlement.
However, some trading and risk-management systems built around the old closing-price mechanism have not fully adapted to the auction process.
This has created confusion around order placement, square-off timing, index movements, and derivative expiry-related positions.