India regulator to issue auction framework soon
The Securities and Exchange Board of India (Sebi) is set to release guidelines for proposed adjustments to the Closing Auction Session (CAS) mechanism, following the receipt of over 3,500 responses to its consultation paper, as announced by its Chairman, Tuhin Kanta Pandey.
Sebi had invited public feedback on its plan to reassess specific elements of the CAS, trading hours, and the settlement process for derivative contracts, with a submission deadline of October 3.
Quick Action on CAS Review
Pandey assured that the regulator would promptly assess the feedback and proceed with the process, given the clear outline of the proposals in the consultation paper.
In September, Sebi suggested modifications to the CAS structure and the method for calculating settlement prices of index and stock derivatives on expiration dates. This review was prompted by the introduction of CAS in the equity cash market and concerns regarding its effect on derivatives settlement prices.
The CAS system aims to establish closing prices via an auction mechanism. Sebi clarified that the review seeks to tackle specific challenges while inviting input on various potential solutions.
According to Pandey, the consultation aimed to address a particular issue while encouraging market participants to propose diverse solutions. He added that the regulator would efficiently compile and evaluate the responses without significant delay.
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Pandey indicated that a circular on this matter is forthcoming, signaling the regulator’s progress in the process.
Corporate Bond Derivatives Market Development
In a separate context, Pandey emphasized the significance of regulatory support, technical infrastructure, and market engagement for the corporate bond derivatives market’s growth. He remarked, “Bond indices and derivatives will be, I would think, a major milestone going forward”.
Sebi aims to support exchange-traded platforms in the bond market and has implemented measures such as an electronic bidding system for primary issuances and the regulation of online bond platform providers.
Foreign Portfolio Investor (FPI) Flows
Regarding FPI flows, Pandey explained that Sebi’s role is to streamline onboarding and access to Indian markets, while investment choices are driven by returns and opportunities across global markets.
Sebi is collaborating with the Reserve Bank of India (RBI) to further simplify FPI access and has already introduced several measures, including granting FPIs access to non-agricultural commodity derivatives, as noted by Pandey.
