Liquidity Hurdles in CAS Fade, MSCI Rebalancing Succeeds

SEBI’s review of the Closing Auction Session, the process that fixes the final price of derivatives on expiry day, has highlighted early liquidity shortages that initially hampered price discovery.

Chairman Tuhin Kanta Pandey noted that these liquidity issues have lessened as market participants adjusted to the auction format.

He pointed out that the system now runs with greater fluidity, drawing positive feedback from traders and clearing members.

The regulator also cited MSCI’s recent confirmation that its index rebalancing was carried out smoothly within the CAS environment, confirming the framework’s robustness.

While the auction mechanism stays in place, SEBI continues to explore refinements to further enhance market depth and transparency.

Pandey also warned that the fast‑growing use of artificial intelligence, particularly agentic AI, requires a clear regulatory stance.

He urged that regulators specify the data access, autonomy level, permissible actions, and transparency requirements for AI applications in trading and risk management.

To guarantee accountability, every AI system must keep auditable logs, be validated through research, and maintain detailed change‑tracking records.

The chairman concluded that innovation and safety can coexist, and that a balanced approach will sustain market confidence while encouraging technological advancement.