Sebi to tweak CAS, change method for derivative trade
MUMBAI: Markets regulator Sebi on Thursday said it will revise the settlement price mechanism for derivatives contracts for Closing Auction Session (CAS). The decision comes exactly a month after CAS was rolled out on Aug 3. Sebi will soon come out with a consultation paper for revising the mechanism, a release from the regulator said.During the past month, introduction of CAS created significant market volatility and at times led to closing price discrepancies between two exchanges. In contrast, globally, CAS is used for a better closing price discovery. Sebi had shifted to CAS from the earlier system of Volume-weighted Average Price (V-WAP) for all stocks traded in the derivatives segment.Over the past month, Sebi chairman Tuhin Kanta Pandey had reiterated on at least two occasions that the regulator would not change the CAS process but was willing to tweak it after looking into trading data.On Aug 20, Sebi had penalised Copthall, a JP Morgan entity registered as an FPI in India, and Mansi Broking, a domestic broker, for manipulating sensex levels during CAS on Aug 13, a weekly F&O contracts expiry day. Then again Aug 27, a day for monthly F&O contracts expiry, there was huge price volatility in sensex and banked contracts during CAS. On Thursday also sensex saw some sharp volatility during CAS.“The framework for CAS was introduced following extensive stakeholder consultations and detailed policy deliberations,” the Sebi release said. “Since its implementation, Sebi has closely engaged with various stakeholders, including stock exchanges, brokers, proprietary traders, software vendors, mutual funds, industry associations and FPIs, with a view to facilitating smooth implementation and addressing operational and other issues arising during the initial period of adoption.“The release said that the regulator had been closely monitoring the functioning of CAS and its impact on the market during the first month of its operation. “During this period, Sebi has received feedback and suggestions from various market participants and stakeholders through multiple channels, including social media and other media platforms. Among the issues raised, a significant area of feedback relates to the determination of settlement prices of derivative contracts on expiry based on the closing pr ice determined through CAS.“
