Sebi Confirms Closing Auction Session Permanent, Eyes SLBM Overhaul

The Securities and Exchange Board of India (Sebi) has confirmed that the closing auction session (CAS) will remain a permanent fixture in the market, as announced by Chairman Tuhin Kanta Pandey on Monday.

Pandey addressed market participants’ concerns, stating the regulator is actively analyzing trading data and feedback to identify areas for improvement. He described CAS as a significant market reform, indicating Sebi would not address every suggestion or criticism.

Understanding the Closing Auction Session

The Sebi Chairman believes that many current concerns will diminish as participation in CAS grows. He also linked the success of CAS to India’s ability to attract foreign portfolio investors (FPIs) and facilitate passive investing.

• Concerns are expected to lessen with increased CAS participation.
• Success is linked to attracting foreign portfolio investors (FPIs).
• The session facilitates passive investing.
• Pandey advised against premature comparisons of India’s CAS with similar global mechanisms.
• A reduction in index divergence already signals improvement.

Expediting Stock Lending and Borrowing Reform

Another key regulatory focus for Sebi is the overhaul of the stock lending and borrowing mechanism (SLBM). Pandey stated that a more efficient SLBM could significantly boost participation in CAS.

• An efficient SLBM could boost CAS participation.
• A working group has been formed to expedite this reform.
• Sebi is consulting market participants before proposing a new framework.
• The matter is being treated with urgency.

Furthermore, Pandey dismissed worries about potential increases in tracking errors for mutual fund schemes. He highlighted that international market participants have generally welcomed the new pricing mechanism.