SEBI CAS proposal gets 20,000 comments by deadline

SEBI confirms 20,000 comments by 7 pm on Oct 3

SEBI said it received 20,000 comments on its consultation paper by 7 pm on October 3, the final day for submissions. The regulator posted the count on X, correcting earlier reports that put responses at around 3,500. A week earlier, SEBI Chairman Tuhin Kanta Pandey had cited over 3,500 comments at a public event. The sharp rise in submissions became a key talking point on social media and trader forums. The consultation covers the Closing Auction Session (CAS), market timings, and the settlement methodology for derivative contracts. SEBI has indicated it will examine the feedback before finalising the framework. The consultation is tied to SEBI’s review of the initial experience with the CAS framework. The closing of the public-comment window now shifts attention to what elements SEBI adopts and when.

What the consultation paper is trying to change

SEBI’s consultation paper was issued on September 12, 2026, and sought public comments until October 3, 2026. It proposed changes to the CAS framework and to how expiry-day settlement prices are determined for index and single-stock derivatives. It also covered market timings and operational aspects of the closing auction. SEBI has described the review as being intended to address specific issues while seeking views on different possible ways of resolving them. The proposals are not final rules, and SEBI explicitly invited public rationale from participants. The public-comment portal and an email route were made available for feedback. The scope of the paper goes beyond a single technical tweak, which partly explains the breadth of responses. With 20,000 comments recorded, the feedback set is now large enough that SEBI’s review process itself becomes material for market participants.

CAS background: introduced for F&O stocks from Aug 3, 2026

The consultation follows SEBI’s initial experience with the CAS framework that was introduced for F&O stocks from August 3, 2026. CAS is a closing auction mechanism, and SEBI’s paper focuses on how it interacts with the existing Continuous Trading Session (CTS). The consultation proposes adjustments to the transition between CTS and CAS. It also discusses changes to how the indicative index value is disseminated during CAS. These operational elements matter because the closing phase is linked to end-of-day price discovery and settlement references. Traders have been debating whether the closing auction changes affect execution, transparency, and closing prints on active days. SEBI has kept the discussion framed as a consultation on mechanisms rather than as an outcome already decided. The next step is SEBI’s assessment of what to implement and the timeline for any change.

The main debate: expiry-day derivatives settlement methodology

A large part of the feedback cited in social discussions focused on how expiry-day settlement prices should be determined. SEBI proposed two alternatives for index and stock derivatives on expiry days. One option is a blended volume-weighted average price (VWAP) based on trades during the last 30 minutes of CTS plus the 10-minute CAS period. The second option is to continue with the existing CTS-only VWAP initially, for at least a year, with a possible transition to the blended methodology after a review. Many traders and market participants favoured retaining the existing last 30-minute CTS VWAP as an interim approach. The preference expressed in the context provided is for delaying any immediate shift to the blended methodology. The discussion is not about whether VWAP is used, but about which trading window should be included. SEBI’s final framework will determine whether CAS becomes part of the settlement reference immediately or only after a transition period.

Options on the table, summarised

SEBI’s consultation presented choices rather than a single prescribed move, and this structure became central to the debate. Participants compared the two settlement alternatives as a question of sequencing and stability. The following table summarises what was proposed in the consultation, based on the information available.

The table shows that the consultation is a package, not only a derivatives-settlement question. Market participants have treated the settlement methodology as the most immediate impact point. Operational items like cancellations and iceberg treatment also draw attention because they change how orders behave late in the session. SEBI has not announced which option it will choose in the final framework. The existence of two alternatives indicates SEBI is weighing trade-offs and implementation risk. The high comment count suggests SEBI may need to address detailed points raised by different market segments. Any final decision will likely be read alongside the feedback themes visible in public discussions.

FIA response: strong objection to immediate blended VWAP

Among the formal responses cited, the Futures Industry Association (FIA) took a clear position on settlement methodology. FIA, described as a global body with members from exchanges, clearing firms and trading firms across countries, strongly disagreed with immediate adoption of a blended VWAP. It backed CTS VWAP as the interim methodology, aligning with the broader preference seen among traders and market participants in the provided context. This response added weight to the argument that changes affecting settlement should be phased in rather than applied immediately. The FIA position, as presented, is focused on the timing of the move rather than rejecting CAS outright. Its submission was made close to the end of the consultation window. The reference to FIA also highlights that the consultation attracted attention beyond domestic retail commentary. SEBI will now consider this and other submissions as it finalises its view. The presence of divergent stakeholders increases the importance of SEBI’s reasoning in the final framework.

Other proposals: cancellations, iceberg orders, and transition gap

Beyond settlement methodology, the consultation included several operational proposals that attracted discussion. SEBI proposed tighter restrictions on cancellation of orders placed beyond 1 per cent of the reference price. It also proposed changes to the treatment of unexecuted quantities of iceberg orders. Another proposal involved a shorter transition between the continuous trading session and CAS. The consultation also covered changes in how the indicative index value is disseminated during CAS. These are microstructure changes that can influence order placement behaviour near the close. Because the consultation combines settlement changes with operational rules, participants have been responding to the package as a whole. The fact that SEBI sought comments on seven proposals indicates the regulator is attempting a broader refinement of the closing mechanism. SEBI has not indicated which of these operational proposals will be implemented as-is versus modified.

Market timings: two structures proposed, feedback sought

SEBI’s consultation also proposed two alternative market-timing structures. In the context provided, one structure described CTS for CAS stocks continuing until 3:30 pm, followed by CAS from 3:31 pm to 3:40 pm. The existence of timing options matters because it affects how participants manage end-of-day execution and hedging around the close. Timing changes can also affect how liquidity shifts between CTS and the auction window. SEBI invited comments on these alternatives rather than stating a final timing schedule. Social chatter and trader feedback often focus on predictable closing routines, and timing changes can be seen as disruptive if introduced abruptly. The consultation design suggests SEBI is measuring whether timing adjustments should accompany other CAS-related changes. The final framework will need to align timings with operational rules like cancellation restrictions and transition mechanics. SEBI’s review will determine whether it changes timings in the same step as settlement methodology changes or staggers implementation.

What SEBI has signalled about next steps

With the consultation now closed, SEBI is expected to examine the large volume of feedback before finalising the revised CAS framework. Chairman Tuhin Kanta Pandey said SEBI would look at the comments quickly and proceed with the next steps, according to PTI quotes from an event organised by CPAI. SEBI has framed the proposals as clear, but the range of comments indicates strong views on sequencing and execution details. SEBI also clarified the count of comments publicly, which suggests it is tracking the consultation closely. The next milestone is a formal framework, not another consultation window, based on the statements in the provided context. Market participants will watch for whether SEBI chooses the blended VWAP immediately or keeps CTS-only VWAP as an interim method. They will also watch for final language on cancellations, iceberg handling, and the CTS-to-CAS transition. Until SEBI publishes the final decision, the consultation paper remains a proposal document rather than an enforceable rule. The 20,000-comment figure has become a headline in itself, reflecting how closely the closing mechanism is being debated.