SEBI Chairman confirms Closing Auction Session is permanent reform

SEBI Chairman Tuhin Kanta Pandey has affirmed that the Closing Auction Session (CAS), introduced on August 3, is a permanent market reform and will not be rolled back despite recent market volatility and trader concerns. The new mechanism, which replaced the volume-weighted average price (VWAP) system to align Indian equities with global benchmarks, has faced criticism due to sharp price movements in the final minutes of trading.

Pandey noted that much of the observed market friction stems from legacy infrastructure and internal systems that have not yet been updated to accommodate the new framework. While the regulator is reviewing feedback from market participants and analyzing social media discussions, any potential adjustments will focus on minor operational tweaks rather than structural changes.

In addition to monitoring CAS, SEBI plans to urgently revamp the securities lending and borrowing mechanism (SLBM) to improve market efficiency and support inter-exchange arbitrage. The regulator also emphasized that while options trading is a significant factor, it cannot be the sole driver of market policy, as India must also prioritize attracting foreign portfolio investors and expanding passive investing.