1 week ago
India Bars JPMorgan Unit Over Alleged Closing Auction Manipulation
India’s market regulator says two firms may have tried to influence stock prices at the end of a trading day.
The firms were trading during a new auction used to help set official closing prices.
Copthall, a Mauritius-based entity linked to JPMorgan Chase, placed very large buy orders.
Mansi Share placed very large sell orders and later cancelled most of them.
SEBI says these actions affected prices for stocks in the Sensex index.
The regulator also says the trades matched options contracts that were expiring that day.
SEBI believes the firms avoided losses or made wrongful gains.
It has temporarily impounded money while it investigates.
The firms can respond to the allegations and ask for a hearing within 21 days.
SEBI barred Copthall Mauritius Investment and Mansi Share and Stock Broking over alleged manipulation during the August 13 closing auction.
The regulator said large orders in BSE Sensex stocks distorted indicative closing prices and benefited the firms’ expiring Sensex options positions.
Copthall allegedly placed buy orders for 3.17 million shares and later cancelled nearly one-third, while Mansi cancelled nearly all of its 1.28 million-share sell orders.
SEBI estimated wrongful gains of 29.6 million rupees for Copthall and 7.2 million rupees for Mansi, ordering about 36.8 million to 37 million rupees impounded.
Both firms have 21 days to respond and request a personal hearing; SEBI said it has found no evidence that they acted together.
- Who
- The Securities and Exchange Board of India accused Copthall Mauritius Investment and Mansi Share and Stock Broking; public records identify Copthall as a JPMorgan Chase entity.
- What
- SEBI banned the firms from trading and ordered approximately 36.8 million to 37 million rupees impounded over alleged manipulation of closing-auction prices.
- Where
- The alleged trades involved BSE Sensex constituent stocks in India’s securities market.
- When
- The alleged activity occurred on August 13, when weekly Sensex derivatives contracts expired; the auction system was introduced on August 3.
- Why
- SEBI said large orders and subsequent cancellations influenced indicative closing prices and benefited the firms’ expiring Sensex options positions.
SEBI’s Allegations
Firm Responses and Market Concerns
Effect of the orders
SEBI’s Allegations
SEBI said outsized buy and sell orders, followed by cancellations, influenced indicative closing prices without being fully executed.
Firm Responses and Market Concerns
JPMorgan declined to comment and Mansi Share did not respond; the allegations remain subject to the firms’ formal responses and a hearing.
Purpose and benefit
SEBI’s Allegations
SEBI said the trading matched the firms’ expiry-day Sensex options positions and helped them avoid losses or make wrongful gains.
Firm Responses and Market Concerns
No detailed defense from either firm was reported, so SEBI’s interpretation has not yet been tested through their formal responses.
Cause of the market disruption
SEBI’s Allegations
SEBI said unfair practices in the closing auction must be addressed to protect price discovery and market integrity.
Firm Responses and Market Concerns
Trader concerns and analyst Tejas Shah’s view attributed the episode to reduced liquidity, suggesting the auction framework may need adjustments; SEBI Chairman Tuhin Kanta Pandey said it would remain while being open to tweaks.
Key facts
- Regulator
- Securities and Exchange Board of India (SEBI)
- Firms named
- Copthall Mauritius Investment and Mansi Share and Stock Broking
- Alleged trading date
- August 13, during the expiry of weekly Sensex derivatives contracts
- Closing auction
- Introduced in India on August 3 to help determine closing prices for more than 200 stocks; reports describe it as a window beginning at 3:15 p.m. IST and lasting about 20 minutes, or as the final 15 minutes of trading
- Estimated gains
- 29.6 million rupees for Copthall and 7.2 million rupees for Mansi
- Impounded funds
- About 36.8 million rupees, also reported as approximately 37 million rupees or $384,000 to $386,000
- Orders cited by SEBI
- Copthall allegedly placed buy orders for 3.17 million shares and cancelled nearly one-third; Mansi allegedly placed sell orders for 1.28 million shares and cancelled nearly all of them
- Investigation status
- The action is interim and subject to further examination; both firms have 21 days to respond and seek a personal hearing
Quotes
Securities and Exchange Board of India (SEBI)
Regulatory authority overseeing Indian securities markets
“"Any manipulation or unfair practices employed to disturb the fair discovery of prices in CAS has to be dealt with sternly by the regulator," SEBI said, adding that such conduct could "undermine the integrity of the CAS mechanism" and disrupt the orderly functioning of securities markets.”
deccanchronicle.com
“SEBI board member Kamlesh Varshney said the two firms carried out manipulative trades during the closing auction window on August 13 to influence the indicative equilibrium price of the BSE Sensex Index and benefit their options positions.”
businesstoday.in
Sources
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