The Securities and Exchange Board of India (SEBI) announced it will issue new guidelines on the Closing Auction Session (CAS) mechanism within a week. This decision follows the review of public comments on proposals to improve the CAS, market timings, and settlement methods for derivative contracts.
- SEBI received around 20,000 comments on the CAS consultation paper by October 3, 2026.
- The CAS mechanism determines closing prices through an auction process.
- SEBI is reviewing Depositories and Participants Regulations to simplify rules and prevent fraud.
- A graded compliance framework for brokers is being explored based on scale and technology use.
- SEBI plans to issue guidelines on responsible AI and machine learning use in market infrastructure.
What is the Closing Auction Session (CAS) mechanism?
The CAS mechanism is a process used to determine the closing prices of securities through an auction. It helps establish fair and transparent prices at the end of the trading day. SEBI introduced CAS in the equity cash segment and is now reviewing its impact on the settlement prices of derivatives, especially on expiry days.
Why is SEBI reviewing the CAS and settlement methodology?
SEBI received feedback from market participants expressing concerns about how the CAS affects the settlement prices of derivatives on expiry days. To address these concerns, SEBI released a consultation paper and invited public comments. After analyzing around 20,000 responses, SEBI is preparing updated guidelines to improve the process.
What changes are expected in the new SEBI guidelines?
The new guidelines aim to enhance the CAS framework and the methodology for determining settlement prices of index and stock derivatives. SEBI also plans to simplify regulations for depositories and participants, strengthen fraud prevention measures, and introduce a graded compliance framework for brokers based on their size, client exposure, and technology dependence.
How will SEBI improve compliance and fraud prevention?
SEBI is reviewing existing regulations to make them simpler and more effective. It is exploring a graded compliance system where brokers will follow rules suited to their scale and technology use, rather than a one-size-fits-all approach. This will help reduce compliance costs and improve market safety.
What steps is SEBI taking regarding technology and market infrastructure?
SEBI is focusing on strengthening business continuity, disaster recovery, cybersecurity, and governance across market infrastructure institutions. It will soon issue guidelines for the responsible use of artificial intelligence (AI) and machine learning. These guidelines will include clear accountability, data controls, kill switches, and human oversight to ensure safe and ethical AI use.
How is SEBI facilitating overseas investors?
To ease access to Indian markets for Persons Resident Outside India, SEBI has consulted on simplifying digital onboarding without requiring physical presence. The regulator received over 400 comments on this proposal and plans to issue a circular soon to implement these changes.
When will these changes take effect?
SEBI targets the implementation of the proposed changes, including the CAS guidelines and compliance framework, by the end of November 2026. These updates aim to improve capital efficiency, reduce compliance costs, and maintain settlement safety in the Indian securities market.
