The Securities and Exchange Board of India (SEBI) Chairman, Tuhin Kanta Pandey on Wednesday said the markets regulator has not observed any manipulation in the newly introduced closing auction session that determines closing price levels.
“The closing auction is a big market structure reform in line with global standards. We are considering all inputs to increase participation,” Tuhin Kanta Pandey said at an event in Mumbai.
“Any new system requires time to settle and attract more participation. SEBI is consulting with various stakeholders, gathering input, and monitoring feedback including discussions on social media. If any adjustments or improvements are needed, we will certainly consider them. You can see that the discrepancies observed on August 3rd have significantly narrowed compared to more recent figures, both for the Sensex and the Nifty,” said Pandey.
He added that SEBI was continuously monitoring data following the transition to the new closing price mechanism and was assessing feedback from market participants. The regulator could tweak the framework if required, he said.
“CAS (Closing Auction Session) is a major micro-structure reform, and we were actually lagging behind in this regard. Many of our global counterparts have already implemented it. Japan did so in 2024. It exists in Hong Kong, the US, Germany, Europe, and Australia. It is crucial for index-based and passive investing, as well as for determining mutual fund NAVs, to have a specific reference price,” he said.
“The previous VWAP-based system had a flaw. A single small trade occurring near the close could disproportionately impact the price, creating significant potential for manipulation. We have encountered issues like “marking the close,” which involve such manipulative possibilities,” Pandey said.
The immediate challenge was not the transparency of the mechanism but lack of understanding and ease of participation.
Pandey said market participants needed time to familiarise themselves with the new process and for trading algorithms and systems built around the earlier methodology to adapt. Several brokers had already started displaying indicative prices on their websites, with more large brokers expected to make the information available through their apps.
Not Observed Any Manipulation In Newly Introduced Closing Auction Session: SEBI Chief
