Closing Auction Session: Why SEBI Believes It Can Now Catch Market Manipulation 'Relatively Easily'

Sebi Chairman Tuhin Kanta Pandey on Wednesday warned that any attempt to "defame" the newly introduced closing auction session (CAS) through manipulation will be dealt with sternly by the capital markets regulator.

Amid wide-ranging concerns expressed by market participants since CAS was introduced on August 3, Pandey said that Sebi''s ability to catch manipulation in CAS is higher than under the older volume weighted average price system (VWAP) it replaces.

"We can catch hold of manipulation in CAS relatively easily. CAS is for transparency. And if anybody feels that they will manipulate CAS for defaming the new system, they are in danger," Pandey told reporters on the sidelines of an event organised by industry grouping Ficci here.

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Pandey said participation in the CAS framework is increasing and specifically mentioned adoption by mutual funds and proprietary traders.

"I think CAS participation is improving and will further improve. We are looking at the constraints for participation," Pandey said on Thursday.

On August 12, Pandey had said Sebi has not observed any manipulation in CAS since its introduction and on Tuesday, also made it clear later that the new framework is a major reform which is here to stay.

As per Sebi, a CAS-like framework has been adopted by major markets in the world for up to two years now.

Sebi had introduced CAS to prevent market manipulation and get 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.

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Introduction of the system led to what the Sebi chief had earlier referred as "teething troubles". He had also appealed to participants to undertake more efforts at learning the new framework, and migrate to technology systems that support CAS.

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