SEBI Bars Copthall Mauritius and Mansi Share Over Alleged Sensex Closing Auction Manipulation

The Securities and Exchange Board of India (SEBI) has taken strict interim action against two entities, Copthall Mauritius Investment and Mansi Share and Stock Broking, following prima facie evidence of market manipulation during last week's Sensex expiry close. The regulatory action centers around the newly-introduced closing auction session (CAS), where the entities allegedly placed aggressive buy and sell orders in index constituents to influence settlement prices for their derivatives positions.

During the closing auction on August 13, the Sensex experienced sharp swings, moving 362.02 points in two seconds, 132.67 points in 12 seconds, and another 405.08 points in 28 seconds, all within a five-minute window. According to SEBI's ex-parte interim order passed on Wednesday by WTM Kamlesh Varshney, the underlying cash-market activity was directly linked to the entities' positions in Sensex options expiring on the same day.

SEBI found that Copthall Mauritius Investment bought heavily across Sensex constituents at prices close to the upper permissible limit. Copthall accounted for 99.91 percent of the relevant buy-order value during the first market move, 96.09 percent during the second, and 85.21 percent during the third. Following the third price spike, the entity cancelled buy orders worth approximately ₹98.12 crore across 30 stocks. The regulator noted that Copthall held substantial long call and short put positions in expiring Sensex options, meaning a higher settlement value directly improved its profitability and reduced obligations from sold put options.

Conversely, Mansi Share and Stock Broking allegedly employed an opposing strategy to benefit from put-option positions that favored a lower index. SEBI's analysis revealed that Mansi's proprietary account placed large sell orders exceeding ₹145.65 crore across several Sensex stocks at prices significantly below prevailing reference levels between 3:21 pm and 3:26 pm. These orders exerted downward pressure on the index before the firm cancelled ₹143.44 crore of them moments before the close, triggering an immediate surge of 232.96 points in the Sensex. SEBI calculated wrongful gains of about ₹71.65 lakh from this activity, concluding that the orders were never intended for genuine trades.

While SEBI did not allege that the two entities acted together, both independently attempted to create favorable index movements for their respective expiry-day options positions. The regulator acted urgently due to outstanding positions held by the entities in the upcoming weekly Sensex options scheduled for August 20. Alongside restraining both entities from the securities market and the closing auction, SEBI ordered Copthall to disgorge ₹2.96 crore and Mansi to disgorge ₹71.65 lakh, directing that their bank accounts be frozen for debits.

Speaking on the sidelines of the FICCI Capital Markets Conference, SEBI Chairman Tuhin Kanta Pandey emphasized that the regulator will take immediate and strict action against anyone attempting to manipulate the closing auction session to defame it. The CAS, which came into effect on August 3, operates as a 20-minute trading window from 3:15 pm to 3:35 pm to determine closing prices by matching buy and sell orders. SEBI noted that while the CAS is designed to reduce volatility and improve price discovery, its structured framework also provides the regulator with enhanced capabilities to identify manipulative practices compared to the previous VWAP system. SEBI stated that the current order is based on preliminary findings and a detailed examination of the matter remains ongoing.

"This regulatory action highlights the critical importance of market integrity and transparency, especially with the introduction of new trading mechanisms like the closing auction session. Regulators are closely monitoring how cash-market activities intersect with derivatives positions on expiry days. For market participants and institutional players, this serves as a clear reminder that surveillance systems are increasingly equipped to detect aggressive, non-genuine order placements designed to skew price discovery." — Dr. Shishir Gupta, Founder & CEO, StartupLanes