SEBI bars two firms over alleged manipulation of new closing auction mechanism

The Securities and Exchange Board of India (SEBI) has barred two securities firms from the Indian market over alleged manipulation of a newly introduced closing auction mechanism used to determine official closing prices for stocks.

The regulator took action against Copthall Mauritius Investment and Mansi Share and Stock Broking in an interim order issued on August 19. The alleged activity took place on August 13, when weekly derivatives contracts linked to the BSE Sensex expired.

SEBI said aggressive buy orders placed by Copthall and large sell orders placed by Mansi during the Closing Auction Session (CAS) affected the prices of Sensex constituent stocks. According to the regulator, Mansi later cancelled a large portion of its sell-side orders.

SEBI estimated that Copthall made wrongful gains of about ₹29.6 million, while Mansi made gains of around ₹7.2 million from the alleged activity. The regulator ordered a total of ₹36.8 million to be impounded from the two firms while its wider investigation continues.

Copthall Mauritius Investment is a Mauritius-based entity owned by JPMorgan Chase, according to public records cited by Reuters. A JPMorgan spokesperson declined to comment, while Mansi Share and Stock Broking was not immediately available for comment. SEBI has not found evidence so far that the two firms acted together.

The case centres on the Closing Auction Session, a new mechanism introduced in India’s equity market on August 3. The 20-minute session begins at 3:15 pm after regular market trading ends and is designed to improve the process used to determine the final official price of securities.

Closing prices are important because they are used for a range of market calculations, including valuations, index levels and settlement-related processes. Any attempt to influence those prices can therefore affect other investors and financial products linked to the market.

SEBI said the alleged actions could undermine the integrity of the new auction system and disrupt the orderly functioning of securities markets. The regulator also said the CAS provides a transparent environment that can make suspicious trading activity easier to identify.

The action comes less than three weeks after the closing auction mechanism was introduced. Reuters reported that the new system had already been associated with sharp movements in the Nifty 50 and BSE Sensex, as well as in options linked to the indices, during its first two weeks.

The regulator’s quick response is significant because the CAS is still a relatively new part of India’s market structure. Market participants are closely watching how the mechanism works and whether it improves price discovery without creating opportunities for traders to influence closing prices.

SEBI’s interim order does not represent the final conclusion of the investigation. The regulator has said further examination is continuing, while the restrictions and recovery measures form part of the action taken at this stage.

The case highlights the importance of market surveillance as India’s trading infrastructure evolves. New mechanisms can improve efficiency and price discovery, but they also require strong monitoring to ensure that trading remains fair.

For investors, the development is a reminder that movements around the closing price can have wider consequences, particularly when derivatives and index-linked products are involved. The regulator’s continued scrutiny will be important as India’s new closing auction system becomes part of normal market activity.