Sebi to issue framework on Closing Auction Session after 3,500+ public comments

In a significant announcement, Sebi chairman Tuhin Kanta Pandey revealed transformative changes to the Closing Auction Session mechanism. This initiative is driven by the feedback of over 3,500 participants who responded to the consultation paper. Apart from updating settlement prices for index and stock derivatives, Sebi aims to invigorate the corporate bond derivatives market, fostering both participation and support for regulatory practices.

Market regulator Sebi will soon issue a framework on proposed changes to the Closing Auction Session (CAS) mechanism after receiving more than 3,500 comments on its consultation paper, its Chairman Tuhin Kanta Pandey said on Saturday.The Securities and Exchange Board of India (Sebi) had sought public comments on its proposal to review certain aspects of the CAS, market timings and the settlement methodology for derivative contracts. The deadline for submitting comments is October 3.Asked when the final framework or circular on CAS can be expected, Pandey said the regulator would quickly examine the responses and move ahead with the process."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," Pandey said at an event organised by CPAI (Commodity & Capital Market Participants Association of India).The regulator would not require much time to compile and analyse the responses as the proposals in the consultation paper were clearly defined, he added.When asked whether a circular on the matter could be expected soon, he said, "Yes, it will be".Sebi in September proposed changes to the CAS framework and the methodology for determining settlement prices of index and stock derivatives on expiry days. The review followed the rollout of the CAS in the equity cash segment and concerns over its impact on derivatives settlement prices.The CAS is aimed at determining closing prices through an auction process.Sebi has said the review is intended to address specific issues while seeking views on different possible ways of resolving them.Pandey said the consultation process was designed to address a specific problem while allowing market participants to suggest different approaches to resolving it.Separately, speaking about the development of the corporate bond derivatives market, Pandey said regulatory enablement, technical infrastructure and market participation would all be important for the segment to grow.He said Sebi was seeking to promote exchange-traded systems in the bond market and had already taken steps such as introducing an electronic bidding platform for primary issuances, regulating online bond platform providers and strengthening the request-for-quote mechanism for secondary-market transactions."Bond indices and derivatives will be, I would think, a major milestone going forward," Pandey said.On foreign portfolio investor (FPI) flows, Pandey said Sebi's role was to facilitate easier onboarding and access to Indian markets while investment decisions ultimately depend on returns and opportunities available across countries.He said Sebi was working with the Reserve Bank of India (RBI) on measures to further ease access for FPIs and noted that the regulator had already taken several steps, including allowing FPIs access to non-agricultural commodity derivatives.Pandey said FPIs' holdings could rise or fall depending on investment opportunities across markets."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.