May tweak F&O settlement price mechanism: Sebi chief

MUMBAI: Sebi chairman Tuhin Kanta Pandey on Thursday said that the newly introduced Closing Auction Session (CAS) will stay but the regulator is studying if the mechanism to arrive at derivatives settlement prices could be changed. Pandey also said that MSCI, one of the largest index service providers in the world, has acknowledged that even though the overlapping of CAS and the index's rebalancing window coincided on Aug 31, the process had ended without any glitch. CAS, a new system of determining the end-of-the-day price for stocks, was introduced on Aug 3 but faced severe criticism for bringing in extreme volatility in the market, including substantial closing price differential on the two exchanges, BSE and NSE. In Thursday's session, as sensex's weekly derivatives contracts were to expire, the index witnessed swings of over 1,000 points. Earlier, on Aug 27, as weekly and monthly contracts on sensex expired, the index and bankex had both witnessed wild swings within minutes of the day's closing. After resisting a change to the CAS system, last week, Sebi said that it would review the existing mechanism and would soon come out with a consultation paper for the same. Currently, CAS is allowed only in those stocks that are also traded in the futures & options (F&O) segments of the bourses. For the rest of the stocks, the earlier mechanism of volume-weighted average price (V-WAP) is followed. On Thursday, Pandey also said that the rollout of CAS across several developed markets had faced teething troubles, including liquidity in the market. He, however, added that several market participants have praised CAS. Earlier, while delivering a speech at the Global Fintech Festival, the Sebi chief said that in the age of agentic AI, tokenisation, quantum computing and other advancements in the technology space, a key question for regulators was how to make "innovation scalable without making risk scalable at the same pace." That was the challenge of "growing fast, growing safe", he said. Pandey also said that as market participants use advanced technologies at greater speed and scale, regulators must be able to supervise with comparable sophistication. "This is where SupTech offers tremendous opportunity. The objective is not simply to automate supervision, but to use data, analytics and AI to identify patterns that may not be visible through traditional methods. At Sebi, we are moving in this direction, with the aim of making supervision increasingly predictive and capable of identifying emerging risks early," he said.