Sebi Plans Closing Auction Guidelines, Eases Market Access for NRIs

The Securities and Exchange Board of India (Sebi) is in the final stages of formulating guidelines for the Closing Auction Session (CAS), with an announcement expected within a week. This update was revealed by Sebi chairman Tuhin Kanta Pandey during the second Capital Market Confluence held in Mumbai.

The move follows a wide-ranging consultation process sparked by concerns over the settlement price of derivatives on expiry days. Sebi's consultation paper on CAS attracted more than 20,000 comments from traders, market participants, and industry experts, reflecting strong interest and diverse viewpoints. The forthcoming guidelines aim to address these concerns, bringing greater clarity and stability to the derivatives segment.

In addition to the CAS guidelines, Sebi is progressing on plans to simplify the digital onboarding process for persons resident outside India (PROIs). Currently, many non-resident investors face hurdles requiring physical presence for market participation. To facilitate easier access to Indian capital markets, Sebi has proposed digital onboarding mechanisms that eliminate this requirement. This initiative received over 400 comments from stakeholders, and a circular detailing the new process is anticipated shortly, according to Pandey.

These steps come amid a broader regulatory goal of making compliance more proportional and less burdensome. Sebi is considering a graded compliance framework for stock brokers, which would tailor requirements based on factors such as business scale, client exposure, and reliance on technology. This approach aims to balance effective oversight with operational flexibility, encouraging more efficient market functioning.

The regulator is also targeting late November to integrate certain market transactions—including tender offers, buybacks, and offers for sale—under the interoperability framework. Currently, these transactions require parallel clearing arrangements, which add to compliance complexity and cost. Bringing them into a unified clearing system is expected to enhance capital efficiency and reduce operational expenses while maintaining robust settlement safety.

Chairman Pandey reviewed several recent regulatory reforms introduced by Sebi. These include the rationalisation of penalties for stock brokers across various exchanges to ensure consistency, updates to the technical-glitch framework aimed at better managing market disruptions, and the launch of a common, principle-based advertisement code applicable to specified Sebi-regulated entities. Such measures reflect Sebi's continuing efforts to strengthen market integrity and investor protection.

Furthermore, Sebi is undertaking a review of the Depositories and Participants Regulations. The objective is to simplify existing rules and bolster fraud prevention mechanisms. This review aligns with global trends where depository systems are being enhanced to support greater transparency and security.

Recognizing the growing role of technology in financial markets, Sebi plans to release guidelines governing the responsible use of artificial intelligence (AI) and machine learning (ML) in market operations. These guidelines will follow a tiered structure that enforces accountability, data governance controls, emergency kill switches, and mandatory human oversight. This framework is designed to harness the benefits of AI and ML while mitigating associated risks.

Overall, Sebi's current initiatives reflect a comprehensive approach to market regulation that incorporates technological advances, stakeholder feedback, and global best practices. By addressing key issues such as settlement pricing, onboarding barriers for non-residents, and compliance proportionality, the regulator aims to foster a more accessible, efficient, and secure capital market environment in India.