India’s securities regulator has prevented a Mauritius-based JPMorgan Chase subsidiary from trading following allegations of using the country’s newly implemented closing auction to manipulate prices and profit from derivatives, amid wider concerns about market stability and enforcement.
India’s markets regulator has barred a Mauritius-based JPMorgan Chase unit from trading after alleging it used the country’s new closing auction to distort prices and profit from derivatives bets, according to an interim order reported by Bloomberg and published by the Securities and Exchange Board of India. SEBI also said it had impounded 37 million rupees, or about $386,000, as alleged wrongful gains linked to Copthall Mauritius Investment Ltd and Mansi Share and Stock Broking Ltd.
The regulator said the trades were carried out during the closing auction on August 13, the weekly expiry day for Sensex derivatives, with the aim of nudging the benchmark’s indicative closing price in a direction that benefited the firms’ options positions. City Air News, citing the order, said Copthall accounted for nearly all the buy-order value in some of the episodes SEBI examined, before cancelling most of those orders within seconds. It said the broker, Mansi Share, also placed large sell orders and then rapidly withdrew most of them.
SEBI’s action comes only weeks after India introduced the auction-based mechanism for setting closing prices on more than 200 stocks, a change intended to align the market with global practice and reduce the scope for manipulation. But traders have complained about sharp and unexplained swings during the final session, and average turnover in the auction window has already fallen materially from levels seen in the last 15 minutes under the old system, Bloomberg reported.
The order also underscores SEBI’s increasingly forceful approach to market conduct. The regulator cited a similar case last year involving Jane Street Group, which has denied wrongdoing and is separately challenging the Indian probe in court. Tejas Shah, head of derivatives at Equirus Securities, told Bloomberg that the exchange regulator is still likely to stick with the framework despite the backlash, a view that echoes SEBI chairman Tuhin Kanta Pandey’s recent comments that the new system is here to stay. JPMorgan declined to comment, while Mansi Share did not immediately respond, according to Bloomberg.
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