Sebi Cracks Down on Market Manipulation: Bans Two Entities Over Sensex Closing Auction Session Fraud

MUMBAI – In a landmark ruling highlighting the vulnerabilities of the newly implemented Closing Auction Session (CAS) system, the Securities and Exchange Board of India (Sebi) has barred two entities from the markets following a sophisticated manipulation scheme. The regulator has ordered the disgorgement of over Rs 3.76 crore in illicit gains, exposing how institutional "money power" was leveraged to artificially inflate Sensex prices for personal profit.

The investigation centered on trading activities that occurred on August 13—the day of the weekly Sensex options contract expiry. Sebi’s probe revealed that Copthall Mauritius, a subsidiary of global financial giant JP Morgan, executed an aggressive strategy involving orders worth Rs 191 crore in Sensex constituent stocks. This massive volume accounted for a staggering 87% of the total trade value in those scrips for the session, dwarfing the next largest trade, which stood at a mere Rs 12.2 crore.

Anatomy of the Manipulation

According to the Sebi order, the manipulation unfolded through a series of tactical spikes during the CAS window:

• The Initial Surge: Between 3:20:41 PM and 3:20:43 PM, Copthall placed aggressive buy orders, many priced substantially above the reference rate. This two-second flurry caused the Sensex to jump 362 points.
• The Secondary Spike: A subsequent rise of 133 points was triggered between 3:24:08 PM and 3:24:20 PM, again fueled by large, calculated buy orders from the Mauritius-based firm.
• The Final Distortion: A dramatic 405-point surge occurred between 3:25:49 PM and 3:26:17 PM. This final move was facilitated by a coordinated dance: while Copthall engaged in a massive buy-order burst, Mansi Share & Stock Broking—the second entity involved—abruptly canceled large outstanding sell orders it had placed earlier.

The removal of Mansi’s sell-side pressure, combined with Copthall’s aggressive buying, pushed the indicative price of the Sensex to artificially elevated levels.

Turning Losses into Profits

Sebi discovered that the primary motivation behind these orchestrated spikes was to salvage expiring options contracts that would have otherwise rendered worthless.

For Copthall, the manipulation enabled a shift in the Sensex from 77,820 to 78,080 points, which created additional payoffs on call positions while helping the entity avoid losses on put positions. Similarly, Mansi Share & Stock Broking was found to have exited "worthless" put positions while its own large, aggressive sell orders—later canceled—were still on the books.

"This movement involved another aggressive buy-order burst by Copthall and was further amplified when Mansi cancelled its large outstanding sell orders," the Sebi report stated.

Regulatory Action

Following the investigation, the regulator has imposed a ban on both Copthall Mauritius and Mansi Share & Stock Broking. The entities have been directed to disgorge illegal profits: approximately Rs 3 crore from Copthall and Rs 76 lakh from Mansi Broking.

When contacted for comment, representatives for JP Morgan declined to comment on the matter.

This ruling serves as a stern warning regarding the Sensex CAS mechanism. As Sebi continues to scrutinize the integrity of market systems, the case underscores the regulator’s commitment to ensuring that institutional scale is not used to undermine the fairness of Indian financial markets.