MUMBAI: Sebi chairman Tuhin Kanta Pandey has reiterated that the closing auction ession is not going anywhere but is here stay, even as traders continue to raise concerns over sharp expiry-day swings linked to the new closing-price mechanism." CAS is here to stay," the Pandey said here on Thursday, clarifying that the regulator is not looking to roll it back.
The statement comes on a day when the Sensex again saw a sharp intraday swing of over 1,000 points during expiry-day trade before ending only 138 points higher, reversing deep cuts in ealier in the day.Pandey said global jurisdictions have faced lower liquidity in the initial phases of implementation of the CAS, the framework that the domestic market adopted from August 3.
Speaking on the sidelines of the seventh edition of the global gintech summit here, the Sebi chairman reiterated that while the regulator is soon going to issue a consultation paper on proposed changes to the CAs framework, the new mechanism is here to stay.“The CAS is here to stay…the only question is of liquidity.
Many market participants have told us about the rollout in all jurisdictions including the US, Japan, Hong Kong, and they have told that initially everywhere when CAS was brought, the liquidity was always an issue and it builds over time. The issue is can we just keep on waiting or we can have some temporary solutions to the issue,” he stated.
“We have had several participants who have absolutely praised that implementation of CAS—that MSCI rebalancing and all have gone off very well. Technically the whole thing went off well. Now, there is a certain segment of the market that gets impacted because of the way we kept the settlement price as completely dependent,” said Pandey.
The market regulator last week announced that it would soon come up with a consultation paper on changes to the methodology used for determining settlement prices of derivative contracts, following feedback. The proposals are expected this week.Among the key global markets, Hong Kong launched a closing auction in 2008 but withdrew it in 2009 after end-of-day price swings. However, it reintroduced the same in 2016 with price limits and other changes.Several brokerages expect tighter auction price bands, an extended or overlapping derivative session, or settlement of index derivatives on the volume-weighted average price.