SEBI Chairman says Closing Auction Session will remain permanent

The Securities and Exchange Board of India will keep the Closing Auction Session as a permanent feature of the Indian stock market.

This decision ensures that a fundamental shift in how prices are discovered at the end of the trading day becomes a long-term standard. By maintaining the system, the regulator aims to reduce market friction caused by legacy systems and improve the accuracy of closing prices.

Tuhin Kanta Pandey, Chairman of the Securities and Exchange Board of India (SEBI), said the auction system will not be rolled back. The Closing Auction Session, which began on Aug. 3, 2024 ^[1], was designed to modernize the way the National Stock Exchange and Bombay Stock Exchange determine final daily valuations.

While the core structure of the system is set, Pandey said the regulator is open to feedback. He said that SEBI may look at tweaks to address any constraints or issues faced by market participants. These adjustments could target specific operational hurdles reported by traders or institutional investors since the rollout.

Pandey said "CAS is here to stay," and said the reform is a critical step for the maturity of the Indian equity markets. The session allows for a more transparent process of price discovery by aggregating orders at the close, a practice common in many global financial hubs.

Market participants have raised various concerns regarding the transition to this system. However, the regulator believes that the benefits of improved price discovery outweigh the initial friction. SEBI intends to monitor the impact of the session on volatility and liquidity as it continues to refine the process.