SEBI Finds No Manipulation in Closing Auction Sessions, Says Tuhin Kanta Pandey
Key Takeaways
- •SEBI Chairperson Tuhin Kanta Pandey confirmed that no manipulation has been detected in the newly introduced closing auction sessions.
- •The CAS replaces the earlier VWAP-based method with an auction mechanism consistent with practices at major global exchanges such as the London Stock Exchange and Deutsche Börse.
- •Participation in the closing auction has been progressively increasing since launch, though SEBI continues to gather stakeholder feedback to further boost engagement.
- •The reform primarily aims to reduce tracking errors for passive investment products like index funds and ETFs by ensuring more accurate and transparent closing prices.
- •SEBI is actively monitoring the system's performance and remains open to refinements based on ongoing market feedback.
SEBI Finds No Manipulation in Closing Auction Sessions, Says Tuhin Kanta Pandey
The Securities and Exchange Board of India (SEBI) has confirmed that no manipulation has been detected in the newly introduced closing auction sessions (CAS), according to Tuhin Kanta Pandey, Chairperson of the securities regulator.
The closing auction system, which determines the official closing prices of listed stocks, was implemented to align Indian market practices with international standards. Closing prices serve as critical benchmarks for fund NAV calculations, derivative settlements, and index tracking.
Participation Gradually Increasing
Since its launch, participation in the closing auction has progressively increased, though concerns had been raised in some quarters about the level of engagement from market participants. SEBI has stated it is actively reviewing feedback from stakeholders to further enhance market participation in the session.
Reform Aimed at Reducing Tracking Errors
The transition to a closing auction framework is considered an important structural reform for Indian equity markets. One of its primary objectives is to reduce tracking discrepancies for passive investment funds, including index funds and exchange-traded funds (ETFs), which rely on accurate closing prices to replicate benchmark indices. The reform takes on added significance as India's passive fund universe has expanded substantially in recent years, driven by growing retail and institutional allocation to index-linked products.
Prior to the introduction of the CAS, Indian exchanges used a volume-weighted average price (VWAP) method over a trailing 30-minute window to determine closing prices. The new auction-based mechanism is designed to provide a more robust and transparent price-discovery process at market close, consistent with practices adopted by major global exchanges such as the London Stock Exchange and Deutsche Börse.
SEBI continues to monitor the system's performance and remains open to refinements based on market feedback.
Source: Economic Times Markets
