Sebi sees no manipulation in closing auction sessions so far, says Tuhin Kanta Pandey

Amid rising concerns over the closing auction sessions, Securities and Exchange Board of India (Sebi) Chairman Tuhin Kanta Pandey said the regulator has not observed any manipulation in the new closing auction sessions so far, but is continuously monitoring the data.

The closing auction session (CAS), which was introduced on August 3, determines closing price levels. Pandey described the change as a major microstructure reform, noting that several global markets, including Japan, Hong Kong, the US, Germany, Europe and Australia, have already implemented similar mechanisms.

He said the reform is important because a reliable closing price is required for index calculations, passive investments and mutual fund net asset values (NAVs).


Under the earlier Volume-Weighted Average Price (VWAP) system, Pandey said there was a possibility that a small trade near the close could influence the closing price.

“There was always a possibility of manipulation from any small trade coming in towards the close, because that price was not actually the VWAP,” he said.

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Pandey, however, acknowledged that losses in derivatives trading are not limited to retail investors, with even sophisticated investors incurring losses, while stressing that gains and losses are inherent risks of participating in financial markets.

“Gains and losses are inherent market risks that people must accept. Our point is that, in many instances—particularly with options trading on expiry days—the process is not as straightforward as people assume, and they often suffer significant losses,” he said.

Pandey added the regulator's concern is particularly around options trading on expiry days, where investors can suffer significant losses despite assuming that the process is relatively straightforward.


He further announced that the regulator will release a detailed paper on the matter soon. The paper, which is expected within the next 8–10 days, will provide a more granular understanding of the participants involved and their trading outcomes.

“We expect to release this document within the next 8–10 days; it will provide a more granular understanding of the participants involved,” he said.

The Sebi cheif believes that all market participants are finding their footing and said that the regulator is in dialogue with them.

“There are many positive aspects, but whenever a change is introduced, it takes time for the entire industry to prepare, as there is often uncertainty about whether the change will actually materialize,” he said.

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