The Government is likely to extend the tenure of Securities and Exchange Board of India (SEBI) Whole-Time Member Kamlesh Chandra Varshney by six months to one year as the market regulator works through issues arising from the newly introduced Closing Auction Session (CAS), according to sources in the finance ministry.
“Given the issues that have emerged with CAS, it was felt that continuity was important for the market regulator at this stage,” one of the sources said.
Amarjeet Singh, the other WTM whose three-year term ends this month, is not expected to be given an extension. The formal announcement is expected within a week, the sources said.
In June, the Department of Economic Affairs invited applications for two WTM positions at SEBI as the three-year tenures of Varshney and Singh approached completion. Varshney took charge as SEBI’s WTM on September 20, 2023, while Singh took charge on September 1, 2023. Both officials were eligible for reappointment, subject to the prescribed age limit.
CAS review
Varshney’s continuation comes at a time when SEBI is reviewing the methodology used to determine settlement prices of derivative contracts following feedback from market participants after the CAS rollout. SEBI, on Thursday, said a consultation paper on the proposed changes may be issued in a week.
The review follows heightened volatility and price spikes seen during the 20-minute auction, particularly on expiry days. The CAS, which replaced the earlier volume-weighted average-based price discovery, matches the buy and sell orders after continuous trading stops at 3:15 pm and determines the closing price for stocks and, consequently, for derivative contracts.
The regulator earlier said the irregularities during the auction were due to a lack of participation in the auction by market participants, and more liquidity could streamline the concerns. CAS was introduced on August 3 with the aim of making the closing price discovery process transparent, ironing out issues with passive funds, and aligning India with global practices.
On August 19, SEBI passed an interim order barring Copthall Mauritius Investment, a JPMorgan entity, and Mansi Share and Stock Broking from the market over alleged manipulative trades during the August 13 Sensex expiry session. Varshney signed the order.
Varshney, a 1990-batch Indian Revenue Service officer and former Joint Secretary in the Department of Revenue, currently handles several key areas at SEBI, including surveillance, legal affairs and enforcement-related functions.