India's market regulator, the Securities and Exchange Board of India (SEBI), has lifted its ban on JPMorgan Chase & Co.'s Mauritius-based unit, Copthall Mauritius Investment Ltd., following the unit's payment of 37 million rupees (approximately $386,000) in alleged wrongful gains. This payment was made in response to SEBI's accusations that Copthall and local firm Mansi Share and Stock Broking Ltd. manipulated the country's new closing auction system for stock prices on August 13. The ban, which temporarily restricted Copthall from accessing India's capital markets, was a significant enforcement action against a prominent foreign player in India's $5.1 trillion stock market.
The allegations stemmed from Copthall and Mansi Share executing unusual trading patterns during the closing auction window on August 13, intended to influence the indicative equilibrium price of the BSE Sensex Index. SEBI's investigation found that Copthall placed large buy orders, accounting for over 90% of all orders in some identified securities, and subsequently canceled a significant portion of them. For instance, on August 13, Copthall placed buy orders totaling 3.17 million shares but later canceled nearly one-third. Similarly, Mansi Share placed and then canceled large sell orders, with SEBI alleging these actions allowed the firms to avoid losses or wrongfully profit from their options positions on the benchmark.
SEBI board member Kamlesh Varshney stated in the initial order that these large buy and sell orders, placed near the highest allowed price band and then canceled, influenced indicative closing prices without full execution. This manipulation allegedly benefited their expiry-day Sensex options positions, which otherwise might have expired worthless. The regulator calculated wrongful gains of 29.6 million rupees for Copthall and 7.16 million rupees for Mansi, totaling 36.7 million rupees ($386,000). The quick resolution, with the ban lifted upon payment, indicates SEBI's aggressive stance in monitoring and enforcing regulations in its financial markets, especially following the controversial introduction of the auction-based system.
