Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey on Wednesday issued a sharp warning to market participants, stating that the regulator would take strict and immediate action against any attempt to manipulate the newly introduced Closing Auction Session (CAS) mechanism. Pandey made the remarks on the sidelines of the FICCI Capital Markets Conference in Mumbai.

The Warning

Speaking directly on the CAS framework, Pandey left little room for ambiguity. “We want to make one thing clear, that if people do manipulation in CAS, then we will take strict action and do it immediately,” he said. The SEBI chairman underscored that the new system gives the regulator significantly greater capability to detect manipulation compared to its predecessor.

“In the CAS system, we have more capability to catch manipulation. Compared to the old VWAP system, in the CAS system, we can catch manipulation relatively easily,” Pandey said.

What the CAS Mechanism Is

The Closing Auction Session was introduced earlier this month as a dedicated 20-minute session at the end of regular trading hours. During this window, exchanges collect buy and sell orders and determine a stock’s closing price at the level where the maximum volume can be executed — a method known as price discovery through order matching.

The CAS replaces the earlier approach of computing the closing price as the volume-weighted average price (VWAP) of trades during the final 30 minutes of the regular market session. The shift is designed to make closing price discovery fairer, more transparent, and more efficient — particularly for large institutional orders.

Why Transparency Is Central

Pandey stressed that the primary objective of CAS is to enhance transparency in closing price determination. He also cautioned participants against attempting to discredit the mechanism. “CAS is for transparency. But if someone thinks that we will manipulate the CAS to defame it, then they are mistaken,” he said. This comes amid broader SEBI efforts to tighten market surveillance and reduce scope for end-of-day price manipulation — a concern that regulators globally have flagged with auction-based closing systems.

Significance for Market Participants

The transition from VWAP to CAS represents a structural shift in how Indian equity markets settle closing prices. For large institutional players and mutual funds — whose benchmark-linked trades are often executed at the closing price — the new mechanism directly affects execution quality and cost. Notably, auction-based closing sessions are already standard practice in several major global markets, including the London Stock Exchange and Nasdaq, lending the CAS model international precedent.

With SEBI’s surveillance infrastructure now calibrated to the CAS framework, market participants have been put on notice that the regulator is watching closely from day one of the new system’s rollout.