Sebi warns against CAS manipulation as participation rises, says new closing auction system is here to stay

Securities and Exchange Board of India (Sebi) Chairman Tuhin Kanta Pandey on Wednesday warned market participants against attempting to manipulate or “defame” the newly introduced Closing Auction Session (CAS), saying the capital markets regulator has stronger tools to detect such activity under the new framework.

The warning comes amid concerns raised by sections of the market since CAS was introduced on August 3, with brokers, traders and other participants flagging issues around participation and the transition from the earlier closing-price mechanism. Pandey, however, said Sebi’s ability to identify manipulation under CAS is higher than under the volume weighted average price (VWAP) system that it replaced.

Sebi sees higher surveillance capability under CAS

“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 body FICCI.

Pandey said participation in the CAS framework is also improving, with mutual funds and proprietary traders among those increasingly using the mechanism. “I think CAS participation is improving and will further improve. We are looking at the constraints for participation,” he said.

To be sure, SEBI had earlier said it had not observed any manipulation in CAS since its launch. Pandey had also described the framework as a major market reform and indicated that it was here to stay.

What is CAS and why did SEBI introduce it?

It may be recalled that SEBI's Closing Auction Session (CAS) is an auction-based mechanism introduced on August 3, 2026, to determine official closing prices for Futures & Options (F&O) stocks. The closing auction session is designed to improve transparency and strengthen the process of determining the closing price of securities.

Under CAS, buy and sell orders are pooled during a designated window towards the end of the trading session and matched through an auction-style mechanism, rather than being executed immediately.

The system is intended to reduce the scope for price manipulation around the market close, when closing prices can have a significant impact on derivatives, mutual fund valuations, index calculations and other market-linked transactions.

According to SEBI, a CAS-like framework has been adopted by major global markets for up to two years. The regulator has positioned the Indian framework as a structural shift aimed at making closing-price discovery more transparent and less vulnerable to manipulation. (With inputs from PTI)