SEBI warns stern action against CAS defamation attempts
Sebi Chairman Tuhin Kanta Pandey warned on Wednesday that any attempt to defame the newly introduced closing auction session (CAS) through manipulation will be dealt with sternly by the capital markets regulator.
Concerns have been wide-ranging since CAS was introduced on August 3. Pandey said the regulator’s ability to catch manipulation in CAS is higher than under the older volume weighted average price system (VWAP) it replaces.
Pandey told reporters that the regulator can catch hold of manipulation in CAS relatively easily. He stated that CAS is for transparency and warned that anyone attempting to manipulate CAS for defaming the new system is in danger.
If there is manipulation in CAS, Sebi will act strongly against it and act immediately, Pandey added.
Participation in the CAS framework is increasing. Pandey specifically mentioned adoption by mutual funds and proprietary traders, noting that they are participating in the framework.
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CAS participation is improving and will further improve, according to Pandey. Pandey said Sebi is looking at the constraints for participation.
Sebi introduced CAS to prevent market manipulation and ensure more transparency. Under the framework, buy and sell orders are pooled together without immediate execution during a designated time window towards the end of trade under an auction style order matching process.
The introduction of the system led to what Pandey had earlier referred to as “teething troubles.” He had also appealed to participants to undertake more efforts at learning the new framework and to migrate to technology systems that support CAS.
Meanwhile, Pandey said Sebi will come out with more granular and updated data on the performance of retail investors’ bets in the futures and options market.
A similar study by Sebi had revealed that over 90% of trades by retail investors led to losses. There were also reports of extreme steps like suicides being committed due to reverses in markets by some individuals. Sebi acted with a slew of measures aimed at lowering speculation in the market and protecting the investors.
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Data released by the Finance Ministry earlier this month revealed individual investors’ losses in derivative trades reduced to ₹91,685 crore in FY26 from ₹1.1 lakh crore in FY25.
Addressing the conference earlier, Pandey said Sebi will soon issue guidelines for responsible use of artificial intelligence/machine learning in the markets. These guidelines will have a tiered approach to set accountability and governance controls, including requirements for regulated entities to ensure the integrity of investor data.
The framework shall require ‘Kill Switch’ and ‘Humans in the Loop’ controls, along with data controls, Pandey added, to ensure that regulated entities are responsible for every AI tool they deploy.
Pandey also made it clear that the regulator aspires to not only attract foreign investments into Indian markets but also act as a hub for global fund management activity, with the proposed framework for portfolio managers dealing with this subject.
Pandey urged industry bodies to identify high-potential enterprises in sectors such as manufacturing, energy, IT, and logistics that are ready to access the capital markets and educate them on the benefits of listing.
