SEBI Consultation on Closing Auction Session
The Securities and Exchange Board of India (Sebi) is set to make a decision on its proposals for the Closing Auction Session (CAS) with a focus on the larger public interest, Chairman Tuhin Kanta Pandey said on October 5.
Pandey disclosed that the regulator received over 20,000 comments on the consultation paper, which translated to nearly 1.35 lakh comments when analyzed proposal-wise across the seven specific measures. The consultation process was initiated as SEBI examines changes to how closing prices are determined in the equity market.
“We were clear enough with our measures,” Pandey stated, emphasizing that any final action would be taken in “consonance with the interest of the larger public.”
GST on Commodity Derivatives
In a separate development, Pandey confirmed that SEBI has written to the Revenue Department regarding the imposition of Goods and Services Tax (GST) on commodity derivatives.
The regulator has been actively working to deepen India’s commodity derivatives market. A key objective is to expand the use of these instruments by producers, farmers, and businesses for managing price risks. The engagement with the Revenue Department suggests an ongoing effort to clarify the tax treatment of these financial instruments.
Margin Trading Facility Regulations
Addressing concerns about leverage in the market, Pandey noted that the existing regulatory framework already limits how much brokers can expand their Margin Trading Facility (MTF) books. Under MTF, investors purchase securities by paying a portion of the transaction value upfront, while the broker finances the remainder, thereby increasing market exposure and leverage.
While acknowledging these existing constraints, the Chairman stated that SEBI is currently examining what additional regulations may be required to ensure market stability.
Approach to F&O Oversight
Regarding the Futures and Options (F&O) segment, Pandey outlined a calibrated regulatory strategy. He stated that SEBI would continue to publish studies and findings in the public domain and address issues as they emerge.
“We are putting the F&O study in the public domain. We are putting out information whenever we find an issue,” he said. However, he clarified that the regulator does not intend to respond to every market development with immediate regulatory intervention. Instead, SEBI plans to address emerging F&O issues through consultation papers.
Pandey also highlighted the role of investor education, stressing the need to make traders more aware of the risks involved in derivatives trading. Additionally, he observed that the mutual fund industry still has significant room for growth, despite the sharp expansion in assets and investor participation seen over the past decade.