India’s securities regulator has swiftly responded to suspected abuses in the recently launched closing auction mechanism, suspending trading for a JPMorgan-linked entity and a domestic broker amid allegations of price distortion on its first day of heavy use.
India’s market regulator has moved quickly against alleged manipulation in the country’s new closing auction system, barring a JPMorgan-linked investment vehicle and a domestic brokerage from trading while it investigates whether they distorted prices on the first day of heavy use. The Securities and Exchange Board of India said Copthall Mauritius Investment and Mansi Share and Stock Broking generated unlawful gains by influencing the closing auction session on August 13, just ten days after the mechanism was introduced. The watchdog has impounded Rs 3.68 crore, or about $384,000, in alleged improper profits.
The action centres on India’s Closing Auction Session, a 20-minute window introduced on August 3 to replace the earlier volume-weighted average price method for setting closing prices. According to SEBI’s January circular, the phased rollout was intended to improve price discovery and bring the market closer to international practice, with the auction designed to make it harder for traders to push around the close. Market reports at the time said the new process was broadly well received on debut, with strong participation from trading members on both major exchanges.
SEBI alleges that Copthall placed aggressive buy orders while Mansi flooded the session with large sell orders during the auction, which coincided with expiry for weekly Sensex derivatives and a period of elevated volatility. The regulator said Mansi then cancelled much of its sell-side activity after the session ended. It estimated that Copthall made Rs 29.6 million from the alleged scheme, while Mansi received Rs 7.2 million.
The case is one of the first major enforcement actions tied to the new auction framework and suggests the regulator was watching the system closely from the outset. SEBI has in recent months shown a willingness to move aggressively against suspected market abuse, including a separate July case in which it uncovered a large pump-and-dump network and imposed sweeping penalties and trading bans.
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