SEBI Chief Warns Of Strict Action Against Closing Auction Session Manipulation

SEBI Chairman Tuhin Kanta Pandey on August 19 warned that the market regulator would take strict and immediate action against any attempts to manipulate the newly introduced Closing Auction Session (CAS) mechanism.

Speaking on the sidelines of the FICCI Capital Markets Conference in Mumbai, Pandey said SEBI has stronger capabilities to identify manipulation under CAS compared with the earlier volume-weighted average price (VWAP) system.

SEBI Says CAS Improves Manipulation Detection

Pandey said the regulator would act promptly if market participants attempted to influence the closing auction process. He also cautioned against efforts to misuse the mechanism or create doubts about its credibility.

According to the SEBI chairman, CAS was introduced primarily to enhance transparency in determining stock closing prices. He maintained that the regulator is better equipped to detect irregularities under the new framework than it was under the previous system.

The comments come amid concerns among some market participants over the impact of the new closing mechanism, including questions about participation levels and potential losses for certain traders.

How the New Closing Auction Session Works

The 20-minute Closing Auction Session was introduced earlier this month. During this period, stock exchanges collect buy and sell orders and determine the closing price at the level where the maximum number of shares can be traded.

The system replaced the earlier method, under which a stock’s closing price was based on the average price of trades executed during the final 30 minutes of regular market hours.

The shift is aimed at creating a fairer and more transparent closing price, while also improving execution efficiency, particularly for large orders.

However, the transition to CAS has generated debate among market participants, with concerns about reduced participation and its potential impact on trading strategies and profitability.

SEBI’s latest warning signals that the regulator intends to closely monitor the new mechanism and act quickly if it detects attempts to influence closing prices improperly.