The Securities and Exchange Board of India (SEBI) is poised to finalise a new framework for the Closing Auction Session (CAS) after receiving more than 3,500 comments on its consultation paper, SEBI Chairman Tuhin Kanta Pandey announced on Saturday. The regulator, which opened the public comment period on the proposed changes in September, said the feedback will be examined promptly and the process will move forward without delay.
Consultation timeline and key proposals
SEBI invited comments on a set of specific reforms relating to the CAS mechanism, trading hours, and the methodology used to calculate settlement prices for derivative contracts. The consultation period is scheduled to close on October 3, and Pandey indicated that the responses are already being compiled and analysed. “Today is the last date, and we will actually quickly look at all these comments and go ahead, because I think our proposals are quite clear,” he told participants at an event organised by the Commodity & Capital Market Participants Association of India (CPAI).
The regulator’s September proposal sought a review of the CAS framework and the settlement‑price calculation method for index and stock derivatives on expiry days. The move followed the introduction of the CAS in the equity cash market and raised concerns about the potential impact of auction‑derived prices on the settlement of derivative contracts. Under the CAS, closing prices are determined through an auction‑based process that matches buy and sell orders to arrive at a single price point.
According to Pandey, the consultation exercise was deliberately structured around a clearly identified issue, allowing market participants to suggest alternative methods of addressing it. He stressed that the proposals outlined in the paper were specific and clearly defined, which, in his view, should minimise the time required to analyse the feedback.
Broader market reforms and bond‑derivative development
In addition to the CAS review, Pandey used the forum to discuss the development of the corporate bond derivatives market. He noted that expansion in this segment would hinge on three factors: regulatory support, adequate technology infrastructure, and greater participation from market players. SEBI, he said, is working to encourage exchange‑traded systems in the bond market and has already introduced several measures to strengthen market infrastructure.
Among the steps highlighted were the launch of an electronic bidding platform for primary bond issuances, regulation of online bond‑platform providers, and enhancements to the request‑for‑quote mechanism for secondary‑market transactions. “Bond indices and derivatives will be, I would think, a major milestone going forward,” Pandey asserted, signalling the regulator’s ambition to broaden the range of tradable instruments linked to the bond market.
Facilitating foreign portfolio investor participation
The chairman also addressed the regulator’s approach to foreign portfolio investors (FPIs). He said SEBI’s focus is on simplifying market access and onboarding for overseas investors, while acknowledging that investment decisions ultimately depend on the relative returns and opportunities available across different markets.
SEBI is collaborating with the Reserve Bank of India (RBI) on measures aimed at further easing FPI participation. Recent regulatory steps include allowing FPIs to trade in non‑agricultural commodity derivatives. Pandey cautioned that FPI holdings in Indian markets could rise or fall based on how Indian opportunities compare with those abroad. “All we can do at the regulatory stage is to listen to what the FPIs have to say, ease their onboarding and access,” he said.
Overall, Pandey’s remarks suggest that SEBI intends to act swiftly on the CAS proposals while continuing to pursue broader market reforms. The regulator’s willingness to incorporate stakeholder feedback, combined with its ongoing work on bond‑derivative infrastructure and FPI facilitation, points to a multi‑pronged strategy aimed at deepening and modernising India’s capital markets.
Industry observers will be watching how SEBI balances the need for transparent, auction‑derived closing prices with the concerns of derivative traders, bond market participants, and foreign investors. The final circular on the CAS framework is expected to be issued shortly after the October 3 deadline, marking a significant step in the evolution of India’s market‑wide settlement mechanisms.
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