India's Securities and Exchange Board (SEBI) has barred Copthall Mauritius Investment, associated with JPMorgan, and Mansi Share and Stock Broking from participating in Indian markets. The regulator alleges the two firms manipulated the country's closing auction mechanism, distorting prices during the Closing Auction Session (CAS) on August 13. SEBI has impounded roughly $384,324 in alleged wrongful gains.
Auction Manipulation
The CAS, launched on August 3, is a 20-minute auction window designed to improve price discovery and make it harder for traders to game closing prices. However, 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, reportedly distorting the closing prices of Sensex stocks.
Regulatory Action
SEBI estimates Copthall netted Rs 29.6 million from the scheme, while Mansi's haul was smaller at Rs 7.2 million. The regulator's enforcement action, coming just six days after the alleged manipulation, signals that SEBI was closely monitoring CAS activity from the start. The CAS was designed to be harder to manipulate than the Volume-Weighted Average Price (VWAP) system it replaced, but this case highlights the ongoing challenges in preventing market manipulation.
