SEBI Chairman Tuhin Kanta Pandey has issued a stern warning against any attempts to manipulate the newly launched Closing Auction Session (CAS), emphasizing transparency and immediate regulatory action.

  • SEBI Chairman Tuhin Kanta Pandey warned of immediate strict action against any manipulation of the Closing Auction Session (CAS).
  • The regulator is set to issue guidelines for the responsible use of AI and Machine Learning in markets.
  • Critical data on the F&O segment for 2025-26 will be released to assess volatility control measures.
  • Proposed reforms are underway for SME IPOs and Portfolio Management Services (PMS).

Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey delivered a decisive warning on Wednesday at the FICCI Capital Markets Conference in Mumbai. He stated that the regulator would not tolerate any attempts to manipulate the recently implemented Closing Auction Session (CAS). Pandey clarified that the CAS mechanism was designed specifically to enhance market transparency, and any attempt to undermine its integrity would be met with swift and severe consequences.

Since its launch earlier this month, the CAS has faced scrutiny due to thin trading volumes as market participants adjust to the new mechanism. This transition has led to noticeable divergences in the closing prices of major indices like the Nifty 50 and Sensex. However, Pandey noted that participation is steadily improving and the regulator is actively addressing existing constraints.

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Why This Matters

BozokMedia analysis shows that the integrity of the closing price mechanism is foundational to market trust. As India seeks to attract more global institutional capital, the ability of SEBI to police new technological mechanisms like the CAS is critical. Any perceived vulnerability in the closing auction could lead to increased volatility and loss of retail investor confidence.

If people manipulate the CAS system, then we will take strict action and do it immediately.

In addition to the CAS, SEBI is closely monitoring the Futures and Options (F&O) segment. The regulator is scheduled to release granular data for the 2025-26 period, which will evaluate the effectiveness of recent measures—such as increased lot sizes and limited expiries—aimed at curbing excessive volatility. This follows alarming previous studies indicating that over 90% of retail traders in the F&O segment incur losses.

Looking toward the future, Pandey highlighted SEBI's focus on technological governance. The regulator plans to introduce a framework for the responsible use of Artificial Intelligence (AI) and Machine Learning. This framework will emphasize accountability through 'Kill Switch' and 'Humans in the Loop' controls to ensure that innovation does not come at the expense of investor protection.

Furthermore, SEBI is reviewing the SME IPO framework to reduce costs for smaller companies and is exploring major overhauls in Portfolio Management Services (PMS) to encourage global fund management activity from India.

Frequently Asked Questions

1. What is the purpose of the Closing Auction Session (CAS)?
The CAS is intended to improve transparency and price discovery during the market closing period.

2. How will SEBI regulate AI in the stock market?
SEBI will implement a tiered approach focusing on governance, data controls, and mandatory human oversight to balance innovation with safety.

Did You Know?: SEBI is working on allowing Portfolio Management Services (PMS) to invest client funds in overseas securities and unlisted companies to deepen market reach.