SEBI Chairman Tuhin Kanta Pandey stated that market policy will focus on long-term growth and passive investing rather than just options trading. The regulator confirmed the new Closing Auction Session is here to stay and announced an upcoming overhaul of the Securities Lending & Borrowing Mechanism to improve market efficiency.
SEBI Chairman Tuhin Kanta Pandey has signaled a shift in regulatory focus, stating that options trading activity will not be the sole driver of market policy. In his comments on Monday, August 17, 2026, the regulator emphasized that the primary priority is to attract foreign portfolio investors and support the growth of passive investing, which currently accounts for approximately 30 percent of the Indian market.
Regarding the newly implemented Closing Auction Session (CAS), introduced on August 3, 2026, the SEBI Chairman reaffirmed that the mechanism is here to stay. While some market participants have raised concerns about integrating legacy trading systems and managing the initial volatility observed since the rollout, SEBI is actively monitoring the data. The regulator noted that there is no evidence of market manipulation and that participation has improved since the transition from the older price-setting method.
A major focus for the regulator is the imminent overhaul of the Securities Lending & Borrowing Mechanism (SLBM). SEBI is currently preparing a consultation paper to address long-standing challenges in the segment. Historically, limited participation and high borrowing costs have hindered liquidity in this space. By improving the SLBM framework, the regulator aims to provide better support for the Closing Auction Session and enhance inter-exchange arbitrage, which could deepen the overall cash market.
For investors and market participants, these shifts reflect a move toward strengthening the cash market structure rather than catering exclusively to short-term derivative strategies. However, the transition presents operational challenges. Many institutions must still update their algorithmic trading systems to align with the new CAS framework. The next important step for the market will be the release of the consultation paper on the SLBM, as any changes in borrowing costs or participation rules will likely influence market liquidity and future trading strategies. The regulator’s clear stance suggests that future policies will favor structural stability over the rapid-fire trading environment often associated with the options segment.