SEBI says closing auction session is here to stay: What it means for stock market investors

SEBI Chairman Tuhin Kanta Pandey has announced that the regulator will retain the Closing Auction Session (CAS), despite market concerns over its impact on liquidity. The CAS, introduced to improve market efficiency, has been in place since the recent MSCI rebalancing exercise. However, liquidity challenges have remained a major concern for the market. Pandey acknowledged that while the CAS implementation was technically successful, a section of the market has been affected by the current settlement price mechanism. SEBI is reviewing the settlement price determination for derivatives contracts on expiry days, following market concerns over its impact on trading and liquidity. The regulator is working to strengthen its use of artificial intelligence in market surveillance and supervision, with a focus on improving risk management and governance. SEBI's technology push comes as financial firms increasingly deploy AI across trading, risk management, compliance, and customer-facing services, creating new supervisory and operational challenges for market regulators. The regulator is studying the experience of other markets where the CAS mechanism has been introduced, including the US, Japan, Hong Kong, and other jurisdictions. While making it clear that SEBI does not intend to roll back the CAS, Pandey emphasized the need to address liquidity concerns. CAS is expected to remain in place, with a focus on building liquidity over time.