SEBI Drowns in 20,000 Comments on Market Timing Shake-Up, Decision Looms

India's market regulator, SEBI, has just closed its public consultation on reforms to the new Closing Auction Session (CAS) and derivatives settlement, inundated with over 20,000 responses by the October 3 deadline, signaling strong market engagement with India's evolving trading rules. This deluge of feedback comes just two months after the CAS system was introduced for F&O-eligible stocks on August 3, 2026, which has already sparked concerns among traders about increased volatility and liquidity challenges. The Securities and Exchange Board of India launched this review in September, proposing two key alternatives for derivatives settlement prices on expiry days: either a 'Blended VWAP' that combines prices from continuous trading and the CAS, or a temporary return to the previous 'Continuous Trading Session (CTS) VWAP' method. Market participants, including brokers and institutional investors, have voiced a preference for the latter, advocating for a period where the existing 30-minute VWAP is retained, allowing the nascent CAS mechanism to mature and gain liquidity independently before its impact is directly factored into critical settlement prices. This ongoing debate highlights a tension between SEBI aim to improve price discovery and market integrity, and the trading community's desire for stability and predictability. SEBI Chairman Tuhin Kanta Pandey has assured that the regulator will rapidly review these extensive comments and expects to issue a new framework or circular 'soon'. This forthcoming directive will outline the finalized adjustments to market timings, particularly how F&O contracts are settled, and could significantly reshape trading strategies on India's stock exchanges. All eyes are now on SEBI to strike a balance between enhancing market efficiency and addressing the operational concerns raised by a significant portion of the trading community.