Sebi Rules Out CAS Rollback
Chair Madhabi Puri Buch assures commitment to resolving ongoing issues, announces consultation paper on securities lending and borrowing mechanism
Sebi chair Madhabi Puri Buch has ruled out a rollback of the Call Auction System (CAS), which determines the closing prices of 200-odd stocks in the futures and options (F&O) segment through an auction process. The CAS, introduced on August 3, replaced the earlier practice of determining the closing prices based on the average price of trades in the final 30 minutes of regular trading.
The CAS has been a subject of controversy, with some traders and market participants expressing concerns over the new mechanism. However, Sebi has assured that it is committed to resolving the ongoing issues. The regulator has been talking to participants about their concerns and is analyzing the issues.
Sebi has also announced that a consultation paper on the securities lending and borrowing mechanism (SLBM) will be released soon. The SLBM framework, which is nearly two decades old, is being reviewed by a working group formed by Sebi. The review aims to improve the link between the cash and derivatives markets, strengthen price discovery, and reduce settlement-related pressure.
Under the SLBM, investors can lend their shares to other investors for a fixed period in return for a fee. Borrowers can use these shares for short selling or other market-related needs. The consultation paper is expected to provide more details on the proposed changes to the SLBM framework.
## What it means The decision to rule out a CAS rollback and the proposed review of the SLBM framework are significant developments in the Indian securities market. The CAS was introduced to make the closing rates less susceptible to the impact of large, price-distorting last-minute orders. The review of the SLBM framework aims to improve the overall efficiency of the market. The outcome of these developments will be closely watched by market participants and investors.
The Sebi chair's assurance to resolve ongoing issues and the proposed consultation paper on SLBM are positive steps towards addressing the concerns of market participants. The regulator's commitment to improving the market infrastructure and reducing settlement-related pressure is expected to boost investor confidence in the Indian securities market.
