CAS here to stay, but open to review for improvement: SEBI

The new Closing Auction Session (CAS) mechanism for determining closing prices is “here to stay”, even as the market regulator Securities Exchange Board of India (SEBI) remains open to stakeholder feedback and possible tweaks to address any issues and for improvement.

“CAS is here to stay for sure. We will see if there are certain constraints or certain issues that we can improve,” SEBI chairman Tuhin Kanta Pandey said, while speaking, on the sidelines of the launch of cyber reporting platforms at the NISM campus at Navi Mumbai.

Further, he said several industry participants had welcomed the move, as it provides a single price at which trades can be executed, countering criticism over tracking errors. Under the earlier system, the closing price was derived using the volume-weighted average price (VWAP). However, several market participants are yet to upgrade their systems, which were built around legacy processes and the earlier VWAP-based mechanism.

“It is a major microstructure change. When there is something going on for years, people think that it will never come — the change will never come. And then therefore they do not give total energy into learning a new system. There are some initial teething problems whenever you come up with something major — because people tend to believe that it will be postponed,” Pandey said, answering to queries on the preparedness of the industry.

“It really depends on our success in terms of attracting FPIs (foreign portfolio investors), allowing passive investing, which is already 30% of the market and we cannot just put out this thing on this issue just because some people want to do options trading in the way they want to do options trading,” he added.

The regulator would soon issue a consultation paper on the securities lending and borrowing mechanism as part of its efforts to strengthen and stabilise the CAS framework, according to him.

On queries whether there were any instances of manipulation, Pandey said SEBI is analysing data. “We are looking at all the suggestions which have come from social media, our teams have gone through them. They are discussing with the participants. We need to meet our objectives. Many things will improve with participation. Indicative prices are very important,” he added.