Securities and Exchange Board of India (Sebi) Chairman Tuhin Kanta Pandey on Monday made it clear that the recently introduced closing auction session (CAS) is here to stay, even as the market regulator looks at ways to address concerns raised by market participants.
Speaking to reporters on the sidelines of the Sebi Symposium on Cyber Defence in Mumbai, Pandey added, “… We will see if there are certain constraints or issues that we can improve, and certainly we will improve.”
The market regulator is currently analysing data on trading activity during CAS as well as feedback on concerns raised by options traders and other market participants.
Pandey emphasised that Sebi cannot react to every suggestion or criticism of the mechanism, which he described as a major market reform.
“We are looking at all the suggestions. I have myself seen a number of suggestions which have come from social media. Our teams have gone through them and they are discussing them with the participants,” he said.
Pandey said many of the concerns could ease as participation in CAS increases. He said the success of CAS also depends on the Indian market’s ability to attract foreign portfolio investors (FPIs) and facilitate passive investing.
Pandey also cautioned against comparing CAS in India with similar mechanisms in other markets at such an early stage, pointing to the reduction in divergence between indices as a sign of improvement.
Another key regulatory priority, he said, is revamping the stock lending and borrowing mechanism (SLBM), which could also support greater participation in CAS.
“A smart SLBM can help to increase participation in CAS. We have constituted a working group and must get to the reformed SLBM very soon. We are consulting with market participants before proposing a new framework. There is a sense of urgency about this,” Pandey said.
He also dismissed concerns over a possible increase in tracking errors of mutual fund schemes, saying international market participants have welcomed the new pricing mechanism.