The Securities and Exchange Board of India (Sebi) will shortly issue guidelines for the responsible use of artificial intelligence (AI) and machine learning in capital markets, with implementation expected within the next week, according to Sebi chairman Tuhin Kanta Pandey at the second Capital Market Confluence 2026 organised by the Bombay Stock Exchange Brokers' Forum in Mumbai on Saturday. As reported by ANI, the AI framework will follow a tiered approach with clear accountability, data controls, kill switches and human oversight. The guidelines will also align with the International Organization of Securities Commissions' supervisory toolkit for AI to support an agile governance framework. Pandey emphasized that "Technology cannot dilute accountability. Regulated entities remain responsible for AI outcomes, data quality, model governance and cyber resilience," stressing that human oversight must remain clear as technology reshapes market operations and supervision.
The Securities and Exchange Board of India (Sebi) will issue fresh guidelines for derivatives settlement during the closing auction session within approximately one week, according to Sebi chairman Tuhin Kanta Pandey at the second Capital Market Confluence 2026 organised by the Bombay Stock Exchange Brokers' Forum in Mumbai on Saturday. As reported by The Hindu BusinessLine, Pandey stated that following review of the Closing Auction Session (CAS), a consultation paper was put out to address concerns regarding settlement price of derivatives on expiry day, and the regulator is currently examining market feedback comments. The CAS review is part of Sebi's broader efforts to deepen India's cash markets, improve price discovery and enhance market efficiency. The consultation paper received around 20,000 comments from traders and industry stakeholders until 7 pm on October 3, 2026, demonstrating significant market engagement with the proposed reforms. Additionally, Sebi is working to simplify digital onboarding for persons resident outside India (PROIs), allowing them to access Indian markets without requiring their physical presence, with the regulator having received more than 400 comments on the proposal and planning to issue a circular shortly.
The Closing Auction Session was introduced on 3 August to determine closing prices for select futures and options (F&O) stocks in India, replacing the previously used volume-weighted average price (VWAP) mechanism. However, according to Mint reports, the framework encountered several issues just a month into operations, attracting backlash from market participants. The major concerns included abrupt price swings and uncertainty on expiry days in the derivatives market. The CAS mechanism aims to determine closing prices through an auction process, with the review following the introduction of CAS in the equity cash segment and concerns over its impact on derivatives settlement prices.
Sebi has suggested that expiry-day settlement prices for index and stock derivatives could be calculated using trades from the last 30 minutes of the continuous trading session (CTS) and the last 10 minutes of the closing auction session, under a blended volume-weighted average price approach. As an alternative, the regulator has proposed retaining the existing VWAP methodology, with settlement based only on trades in the final 30 minutes of continuous trading, before potentially shifting to the blended approach after at least a year of experience with CAS. The consultation paper was open to feedback until October 3, with the move expected to improve capital efficiency and reduce compliance costs while maintaining settlement safety.
Sebi has proposed two alternatives for market timings, as reported by Mint. Under the first option, CTS for CAS stocks would run until 3:30pm, followed by CAS from about 3:30pm to 3:40pm, with derivatives trading continuing until 3:45pm. The second alternative maintains the existing 3:15pm cut-off for CTS in CAS stocks, with CAS running until 3:25pm and derivatives trading ending at 3:30pm. The regulator has separately proposed reducing the transition period between CTS and CAS from 5 minutes to up to 1 minute, while shortening the post-CAS derivatives trading window from 10 minutes to 5 minutes.
According to The Hindu BusinessLine, Sebi is reviewing the Depositories and Participants Regulations to simplify rules and strengthen fraud prevention, while exploring a graded compliance framework for stock brokers based on their scale, client exposure and dependence on technology. Pandey emphasized that "One size need not fit all" in regulatory approach. The regulator is also addressing concerns over certain transactions, including tender offers, share buybacks and offers for sale, remaining outside the interoperability framework and requiring parallel clearing arrangements. Implementation of changes to bring tender offers, buybacks and offers for sale within the interoperability framework is targeted by the end of November 2026, as reported by ANI. These transactions currently require parallel clearing arrangements, increasing costs and compliance requirements. The proposed changes are expected to improve capital efficiency and lower compliance costs while preserving settlement safety.
