SEBI chief Tuhin Kanta Pandey backs CAS, says market rules must adapt to current realities

New business data points to the fact that SEBI chairman Tuhin Kanta Pandey on Thursday defended the regulator’s proposed Closing Auction Session (CAS) mechanism, saying market rules need to evolve with changing realities and that the proposed framework could address shortcomings in the existing system. He was speaking at a press briefing after the SEBI Board meeting in Mumbai.

“Every market is peculiar and we should not be ashamed to adjust with the realities of the current market,” Pandey stated.

The Securities and Exchange Board of India has received more than 3,500 comments on its consultation paper on the proposed changes. The consultation closes on October 3, after which the regulator will analyse the responses and decide on the way forward.

Pandey stated the consultation paper was aimed at addressing a specific problem while additionally seeking views on different ways of solving it.

“Our consultation paper is quite obvious, so it really intends to solve a problem. So there is no doubt around it, but we are additionally giving different means of solving the offering,” he stated.

He stated SEBI’s surveillance systems have additionally improved, which would backing the proposed mechanism. “Our surveillance systems are improving and are better than before. CAS is additionally a better mechanism as we are pooling in the orders,” Pandey stated.

The proposed mechanism is particularly relevant for passive investing, where a common execution price can help ensure that transactions are executed on the same basis, he stated. “CAS is important because in terms of passive investing, it is important to have one execution price,” Pandey stated.

He additionally pointed to a limitation in the earlier mechanism, where the price used was derived rather than being the price at which an actual transaction took place. “The previous mechanism was a derived price but it wasn't the price that any transaction takes place,” he stated.