JPMorgan Chase & Co.'s Copthall Mauritius Investment Ltd. unit intends to contend that any violation of Indian securities regulations was technical in nature, not an intentional market manipulation. This stance comes after India's Securities and Exchange Board of India (SEBI) swiftly banned Copthall and local brokerage Mansi Share and Stock Broking Ltd. from the capital market and impounded 37 million rupees (approximately $386,000) in alleged wrongful gains. The regulator's order, issued within six days of the alleged trading on August 13, marked a significant departure from previous regulatory timelines, which often took years for such rulings.
SEBI's interim order alleged that Copthall and Mansi Share executed manipulative trades during the newly introduced closing auction window on August 13. This manipulation aimed to influence the indicative equilibrium price of the BSE Sensex Index, thereby benefiting their options positions on the benchmark. Copthall allegedly placed large buy orders, accounting for 86.6% of the gross buy value in Sensex constituents during the auction and nearly 100% of a 362-point surge, only to cancel a substantial portion, including 1.038 million out of 3.166 million shares ordered. Similarly, Mansi Share placed large sell orders and subsequently cancelled almost all of them, allegedly to depress the index temporarily before exiting profitable options positions. SEBI calculated wrongful gains of approximately 29.6 million rupees for Copthall and 7.164 million rupees for Mansi.
The rapid regulatory action highlights SEBI's determination to maintain the integrity of India's $5.1 trillion stock market, particularly after introducing an auction-based system earlier this month for over 200 stocks. This new system, intended to align India with global practices and reduce manipulation, has faced criticism from traders due to unexplained spikes in stock benchmarks during closing sessions and decreased liquidity. Market watchers, like Tejas Shah of Equirus Securities Pvt., noted the lack of liquidity on the BSE contributed to the situation. Despite concerns, SEBI appears committed to the new framework, signaling close monitoring of trading activities, as indicated by the quick decision against JPMorgan's unit.
