Source money control
MUMBAI — India’s capital markets regulator has dealt a swift blow to algorithmic market manipulation, barring a JPMorgan Chase & Co. unit and a domestic brokerage from the securities market for allegedly rigging the newly introduced Closing Auction Session (CAS).
In an ex-parte interim order issued by the Securities and Exchange Board of India (SEBI), the regulator prohibited Mauritius-based Copthall Mauritius Investment Ltd (a JPMorgan entity) and Mansi Share and Stock Broking Pvt Ltd from trading, while impounding a combined ₹3.68 crore in alleged unlawful gains.
Key Highlights of the Regulatory Action
Unlawful Gains Impounded: SEBI ordered the impounding of ₹2.96 crore from Copthall Mauritius and ₹71.65 lakh from Mansi Share.
Expiry-Day Manipulation: The violations occurred during the Sensex weekly derivatives expiry on August 13, barely two weeks after the CAS framework went live on August 3.
Immediate Market Ban: Both entities were barred from accessing the securities market and specifically restrained from participating in closing auction sessions pending a full investigation.
The Modus Operandi
The Closing Auction Session was implemented to improve end-of-day price discovery by pooling buy and sell orders between 3:20 PM and 3:30 PM to match trades at an Indicative Equilibrium Price (IEP). However, surveillance logs revealed unnatural volatility in the index:
EntityAction in Underlying StocksDerivative Objective
Copthall Mauritius (JPMorgan)Placed aggressive buy orders across all 30 Sensex constituent stocks at the upper 3% price ceiling—accounting for up to 99.9% of total buy order value—before cancelling large portions.Artificially inflated the closing IEP to profit from long call/options positions expiring that afternoon.
Mansi Share & Stock BrokingSubmitted sell orders worth over ₹143 crore across eight heavyweights below reference prices, cancelling 99% within seconds.Artificially suppressed the IEP to benefit from net short and put options holdings.
Though SEBI noted the two entities did not act in concert, each independently leveraged heavy cash-market orders to tilt the settlement price of expiring derivatives contracts.
A Clear Warning to Institutional Desks
SEBI Whole-Time Member Kamlesh Chandra Varshney underscored that manipulation of the closing price discovery mechanism threatens the entire market structure.
The speed of the intervention—coming before the next weekly expiry cycle—sends an unmistakable signal to institutional desks and proprietary trading firms: high-frequency quoting designed solely to nudge benchmark settlement levels will face immediate enforcement rather than drawn-out regulatory reviews.
