India's securities regulator, the Securities and Exchange Board of India (SEBI), issued a rapid interim order against JPMorgan Chase & Co.'s unit, Copthall Mauritius Investment Ltd., and local brokerage firm Mansi Share and Stock Broking Ltd. The ban from the capital market came within six days of alleged manipulative trading on August 13, a stark contrast to previous instances where such rulings often took years. This quick response by SEBI is viewed by market watchers as a deterrent against attempts to manipulate the country's newly introduced closing stock auction. The speed of the regulator's action signals a heightened scrutiny of trading practices in this new system.
The SEBI order accuses Copthall of using the Closing Auction Session (CAS) to artificially inflate prices of BSE Sensex stocks on August 13, coinciding with the expiry of weekly derivatives contracts linked to the index. According to the regulator, Copthall placed substantial buy orders across all Sensex stocks at prices significantly above market levels, which were not intended for genuine acquisition, with many later canceled. These trades were allegedly designed to boost the Sensex's closing value, thereby increasing the value of Copthall's expiring options positions and generating gains of $309,607 (29.6 million rupees).
Mansi Share and Stock Broking Ltd. is also implicated for allegedly placing large sell orders in eight Sensex stocks below prevailing market prices during the CAS, temporarily depressing the index. The regulator stated that Mansi later canceled almost all of these orders after exiting profitable options positions. Both firms have been barred from the securities market and prohibited from participating in the CAS during the ongoing investigation. SEBI has impounded a combined $384,324 (36.8 million rupees) in alleged wrongful gains from both entities. This swift and decisive action highlights the regulator's commitment to maintaining fair price discovery, especially given that the auction-discovered price is crucial for options settlement and mutual fund net asset value calculations. While Copthall can challenge the order, the regulator emphasized that such conduct, if allowed to persist, could harm investors and market integrity.
