Sebi chief Tuhin Kanta Pandey says CAS here to stay, will study concerns over rollout

Sebi Chairman Tuhin Kanta Pandey on Monday said the Closing Auction Session (CAS) is here to stay, even as the regulator reviews concerns raised by traders and other market participants over the new system.

Pandey said Sebi first needs to understand the “deformities” in the implementation of CAS and determine how they can be addressed. The concerns, he said, are largely around legacy systems that have not yet been updated for the new closing auction framework.

“We are talking to participants about the concerns. We are analysing the issues and will soon come with a view,” he said.


However, “there are no concerns around tracking errors in CAS,” Pandey added.

The comments came after the launch of CAS triggered sharp moves in the final minutes of trading, raising concerns among brokers, traders and fund managers. Introduced on August 3, the new mechanism is used to determine the official closing price of stocks in the futures and options segment.

Under the earlier system, the closing price of such stocks was based on the volume-weighted average price of trades during the final 30 minutes of continuous trading. CAS replaced this with a separate auction window, bringing India’s closing price discovery process closer to practices followed in several global markets.

However, the transition has not been smooth. In the first few sessions after the launch, traders flagged unusual moves in Nifty stocks during the auction window and divergence between major indices. Reuters reported that the new auction system led to sharp equity price moves in the final minutes of trading, creating challenges for brokers, exchanges and fund managers.

Sebi has so far not found evidence of manipulation in the new closing auction session. Pandey had earlier said the regulator had not observed any manipulation in CAS but was continuously monitoring the data.

The regulator’s stance indicates that the concerns are centred on the implementation of CAS, rather than the auction mechanism itself. CAS is used in several large global markets to improve closing price discovery, particularly for stocks with heavy institutional participation. In India, the system is expected to provide a cleaner closing price for stocks, mutual fund NAVs, index calculations and derivatives settlement.

The key concern among market participants is that some trading and risk-management systems were built around the old closing-price mechanism and have not yet fully adapted to the auction process. This has created confusion around order placement, square-off timing, index movements and derivative expiry-related positions.

Bernstein analysts said index-options activity could face a near-term drag because of CAS. The brokerage said investor conversations had focused on the potential impact on volumes, with its analysis showing that volumes in the last 15 minutes had thinned to 1.6% to 2.3% of daily turnover on NSE, compared with a historical share of 10.1%.

The disruption has also sparked anger among retail traders. Some traders called for a boycott and declared a “No Trade Day” in protest against CAS, according to reports.

The early concerns have put pressure on exchanges and brokers to better explain the system and update trading platforms, risk engines and square-off processes. Brokers have also been issuing explainers to clients on how CAS works, how closing prices are determined and how orders are handled during the auction window.