India’s Securities and Exchange Board (SEBI) has barred a JPMorgan-linked entity and a domestic brokerage from participating in Indian markets, alleging the two firms manipulated the country’s brand-new closing auction mechanism just ten days after it launched.
The interim order, issued on August 19, targets Copthall Mauritius Investment, which is associated with JPMorgan, and Mansi Share and Stock Broking. SEBI says the firms distorted prices during the Closing Auction Session (CAS) on August 13, the same day BSE Sensex weekly derivatives contracts expired. The regulator has impounded a total of Rs 3.68 crore, roughly $384,324, in alleged wrongful gains.
What happened during the auction
The CAS is a relatively new feature of India’s equity markets. It launched on August 3 as a replacement for the Volume-Weighted Average Price (VWAP) method that had previously been used to determine closing prices. The idea behind the 20-minute auction window was straightforward: improve price discovery and make it harder for traders to game closing prices.
According to SEBI’s findings, Copthall placed aggressive buy orders during the CAS on August 13 while Mansi flooded the session with large sell orders. The coordinated activity reportedly distorted the closing prices of Sensex stocks during a period that already carried heightened volatility because of the derivatives expiry.
Mansi allegedly canceled much of its sell-side activity immediately after the auction session concluded. SEBI estimates Copthall netted Rs 29.6 million from the scheme, while Mansi’s haul was smaller at Rs 7.2 million. Combined, those figures account for the Rs 3.68 crore that the regulator has now frozen.
A new mechanism, an old playbook
The CAS was specifically designed to be harder to manipulate than the VWAP system it replaced. VWAP closing prices were calculated using the last 15 minutes of continuous trading, which gave sophisticated traders a relatively wide window to push prices around. The auction format was supposed to compress that vulnerability into a more transparent, competitive bidding process.
This enforcement action represents one of the first significant cases tied to the CAS implementation. The speed of this enforcement, just six days between the alleged manipulation on August 13 and the interim order on August 19, signals that the regulator was likely monitoring CAS activity closely from the start.
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