Sebi Receives Over 3,500 Comments on CAS Rules Ahead of Finalization

The Securities and Exchange Board of India (Sebi) is preparing to finalize its framework for modifications to the Closing Auction Session (CAS) mechanism, having garnered more than 3,500 comments on its consultation paper. This announcement was made by Sebi Chairman Tuhin Kanta Pandey during an event hosted by the Commodity & Capital Market Participants Association of India on Saturday. The feedback received will be reviewed promptly, as Pandey indicated that the proposals in the consultation paper were well-defined and specific.

The public consultation period, which concluded on October 3, focused on proposed changes concerning the CAS, trading hours, and the methodology for determining settlement prices for derivative contracts. In September, Sebi initiated a review of the CAS framework and the methods used to calculate settlement prices for index and stock derivatives on expiration days. This review was prompted by the introduction of CAS in the equity cash market and concerns regarding its effect on derivative contract settlement prices.

Under the CAS mechanism, closing prices are established through an auction-based process. Sebi's proposed review aims to tackle specific concerns while allowing market participants to propose alternative solutions. Pandey emphasized that the consultation was designed around clearly identified issues, encouraging stakeholders to suggest various methods for resolution.

Regarding the development of the corporate bond derivatives market, Pandey noted that its growth would hinge on regulatory support, robust technology infrastructure, and increased participation from market players. Sebi is actively working to promote exchange-traded systems within the bond market and has introduced several initiatives to bolster market infrastructure, including an electronic bidding platform for primary bond issuances and regulations for online bond platform providers.

Looking ahead, Pandey expressed optimism about the future of bond indices and derivatives, viewing them as significant milestones. He also addressed foreign portfolio investor (FPI) flows into India, stating that Sebi's priority is to facilitate easier market access for foreign investors. However, he acknowledged that investment decisions are ultimately influenced by the comparative returns and opportunities available in various markets. Sebi is collaborating with the Reserve Bank of India to further simplify access for FPIs, having already implemented measures allowing FPIs to engage in non-agricultural commodity derivatives.