The Securities and Exchange Board of India (Sebi) is set to finalise its proposed framework for changes to the Closing Auction Session (CAS) mechanism after receiving more than 3,500 comments on its consultation paper, Sebi Chairman Tuhin Kanta Pandey said on Saturday.
The capital markets regulator is expected to examine the feedback shortly and take the process forward. Pandey said the responses should not take long to compile and analyse as the proposals outlined in the consultation paper were specific and clearly defined.
“Today is the last date, and we will actually quickly look at all these comments and go ahead, because I think our proposals are quite clear,” Pandey said at an event organised by CPAI (Commodity & Capital Market Participants Association of India).
Sebi had invited public comments on proposed changes relating to the CAS, trading hours and the methodology used to determine settlement prices for derivative contracts. The consultation period closes on October 3.
Sebi proposes changes to closing auction mechanism
In September, Sebi proposed a review of the CAS framework as well as the methodology for calculating settlement prices for index and stock derivatives on expiry days.
The move followed the introduction of CAS in the equity cash market and concerns regarding its potential impact on the prices used to settle derivative contracts.
Under the CAS mechanism, closing prices are determined through an auction-based process. Sebi has said the proposed review seeks to address specific concerns while giving market participants an opportunity to offer alternative solutions.
Pandey said the consultation exercise was structured around a clearly identified issue, with stakeholders free to suggest different methods of addressing it.
Sebi focuses on corporate bond derivatives market
On the development of the corporate bond derivatives market, Pandey said its expansion would depend on regulatory support, adequate technology infrastructure and greater participation from market participants.
He said Sebi was working to encourage exchange-traded systems in the bond market and had already introduced several measures to strengthen market infrastructure.
These include an electronic bidding platform for primary bond issuances, regulation of online bond platform providers and measures to strengthen the request-for-quote mechanism for transactions in the secondary market.
“Bond indices and derivatives will be, I would think, a major milestone going forward,” Pandey said.
Sebi, RBI working to ease FPI access
On foreign portfolio investor (FPI) flows into India, Pandey said Sebi’s focus was on making market access and onboarding easier for overseas investors.
However, investment decisions ultimately depend on the returns and opportunities available across different markets, he said.
Sebi is also working with the Reserve Bank of India (RBI) on measures aimed at further simplifying access for FPIs. The regulator has already introduced several measures in this direction, including permitting FPIs to participate in non-agricultural commodity derivatives.
Pandey said FPI holdings in Indian markets could increase or decline depending on how investment opportunities compare across countries and markets.
“All we can do at the regulatory stage is to listen to what the FPIs have to say, ease their onboarding and access,” he said.
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