India’s CAS liquidity concerns not unique, says Sebi chief

Countries including the US, Japan and Hong Kong also faced low liquidity when they introduced closing auction sessions (CAS), but liquidity recovered over time, Securities and Exchange Board of India (Sebi) chief Tuhin Kanta Pandey said on Thursday.

“Many market participants have told us about rollout of CAS in all jurisdictions including US, Japan, Hong Kong and they have told that initially, everywhere, wherever CAS was brought in, liquidity was always an issue. It builds up over time,” Pandey said on the sidelines of the Global Fintech Fest 2026.

The comments come as India’s market regulator looks to tweak the CAS framework to improve price discovery for the derivatives market on expiry days.

On 3 September, Sebi said it would issue a consultation paper to review how settlement prices for derivative contracts are determined, following industry feedback on the impact of CAS on expiry-day pricing.

Low participation

The framework, introduced on 3 August, has faced low participation and thin liquidity during the last 15 minutes of trading, keeping several market participants from using the mechanism.

Mint reported on 7 September that the Indian market regulator may consider settling weekly and monthly derivatives using the earlier volume-weighted average price (VWAP) model, or a combination of VWAP and CAS prices.

Derivatives contracts are settled every Tuesday on the National Stock Exchange and every Thursday on BSE. Before CAS was introduced, stock and index derivatives were settled using VWAP—the average price at which an asset traded, weighted by the volume traded at each price—during the last 30 minutes of trading.

“It is the determination of a closing price based on CAS as the sole determiner in the derivatives market, which is actually the point in question,” the Sebi chief said.

With the introduction of CAS, the continuous trading session (CTS) for eligible cash stocks closes at 3:15 pm, while derivatives trading in these 213 stocks continues until 3:40 pm. Under CAS, orders can be placed between 3:20 pm and 3:30 pm, with closing prices discovered based on maximum bids and offers between 3:28 pm and 3:30 pm.

However, the framework has faced several episodes of abrupt price swings and uncertainty around closing prices.

For instance, on 3 September, the BSE Sensex plunged about 2,100 points in the first five minutes of the auction session, only to recover soon after. The index ultimately closed 417 points lower at 76,152.86.