SEBI chief warns against manipulation of new closing auction system, says strict action will follow

The new system, launched earlier this month, has been in focus due to thin volumes as traders get used to it, leading to sharper-than-usual divergence in the closing prices of both the benchmark Nifty 50 and the Sensex indices.

He also said the regulator will release data for the futures and options (F&O) segment for 2025-26 on Thursday (August 20), which will indicate if the measures taken in recent times by the SEBI and the Ministry of Finance to curb excessive volatility in the segment have been fruitful. While SEBI has taken measures such as increasing lot sizes and limiting the number of expiries per exchange, the finance ministry hiked the Securities Transaction Tax on the segment in the latest Union Budget.

The regulator had released a similar study earlier, which had flagged that over 90% of trades by retail investors led to losses, sometimes even leading to such investors taking extreme steps like taking their own lives. The study will be more granular this time, providing more colour on the bets made by the retail audience in the F&O segment, Pandey said.

Measures on tech, corporate bonds & other areas underway

Pandey said the regulator is working on a host of measures spanning domains like technology, deepening the corporate bond market, review of disclosure norms, and increasing foreign investor participation for the next phase of growth of the Indian markets.

On technology, Pandey said SEBI will shortly issue guidelines for the responsible use of AI and machine learning in the markets. “These guidelines will provide for a tiered approach, with emphasis on clear accountability and governance controls. The framework shall require ‘Kill Switch’ and ‘Humans in the Loop’ controls, along with data controls. The aim is to balance innovation with investor protection,” he said.

The regulator is also reviewing the framework guiding the IPOs of small and medium enterprises (SMEs).“Issues such as market making adds to cost ‌for ⁠small company IPOs. A comprehensive review is underway,” he said.

SEBI is also looking to support global ‌fund management activity from India, Pandey said adding that proposed ⁠changes to portfolio manager regulations would support decision-makers in ‌trading from onshore, utilising the abundant talent the country has in this regard.

The regulator had last month released a consultation paper proposing a major overhaul of the Portfolio Management Services (PMS) segment, including measures like allowing such schemes to invest client funds in overseas securities, investing in unlisted companies, and creating a new mutual fund PMS product.