SEBI's Transition from VWAP to the Closing Auction Session (CAS) Mechanism

Gist The Securities and Exchange Board of India SEBI has replaced the traditional Volume-Weighted Average Price VWAP system with a new Closing Auction Session CAS mechanism to determine the daily closing prices of stocks. This regulatory shift aims to prevent large institutional players from manipulating closing prices through heavy last-minute trading, bringing Indian equity markets in line with developed global exchanges. For civil services aspirants, this development illustrates the ongoing evolution of India's capital market regulation as it attempts to balance global best practices with the unique realities of a retail-heavy domestic market. Background The Securities and Exchange Board of India SEBI is the statutory regulatory body for Indian capital markets, responsible for ensuring fair price discovery and protecting investor interests. Previously, Indian stock exchanges utilized the Volume-Weighted Average Price VWAP system, which calculated a stock's final closing price based on the average trading price over the last 30 minutes of the session. The VWAP mechanism was vulnerable to gaming by large market players such as Foreign Institutional Investors , who could execute massive trade volumes in the final moments…