SEBI Bans Copthall Mauritius, Mansi Broking From Markets Over Alleged Manipulation In Call Auction Expiry

Markets regulator Sebi on Wednesday barred two entities from the securities market as well as from participating in equity call auction sessions after finding prima facie evidence of manipulative trading during the auction's expiry on the BSE Sensex on August 13.

This order is the first by the capital markets watchdog in connection with alleged manipulation during the newly introduced Call Auction Session (CAS) mechanism, which became effective on August 3.

In an ex-parte interim order, Sebi said Copthall Mauritius Investment Ltd, a foreign portfolio investor, and Mansi Share and Stock Broking Pvt Ltd adopted aggressive and opposite trading strategies during the CAS to influence the indicative equilibrium price (IEP) on the Sensex.

The regulator said three sharp movements of 362.02 points, 132.67 points and 405.08 points were recorded on the Sensex within periods ranging from two to 28 seconds during the session.

According to the order, Copthall placed large buy orders across Sensex constituents at prices around 3% above the reference price.

During the first spike, it accounted for 99.91% of the total buy-order value, while its buy orders accounted for 96.09% and 85.21% during the second and third spikes, respectively, Sebi said in the order.

Sebi said Mansi Share and Stock Broking placed sell orders aggregating 12.65 lakh shares across eight Sensex constituents at prices below the reference price and subsequently cancelled the entire block within a few seconds.

The markets watchdog noted that the trading patterns of both entities had to be considered alongside their expiry-day Sensex options positions. Copthall's positions could benefit from an upward movement in the index, while Mansi's put-option positions could benefit from a decline.

Sebi has prima facie calculated wrongful gains of ₹2.96 crore for Copthall and ₹71.64 lakh for Mansi Share and Stock Broking, taking the total to ₹3.67 crore.

Under its interim directions, Sebi has directed the impounding of the amounts, restrained both the entities from accessing the securities markets and barred them from participating in the equity CAS until further orders.

The regulator has also directed banks and depositories to restrict debits from the entities' accounts, and the transfer or redemption of securities.

The Securities and Exchange Board of India (Sebi) introduced CAS through a circular in January this year, with the framework coming into effect on August 3. CAS initially applied to stocks in the cash segment for which derivative contracts are available.

Under the mechanism, normal trading in the covered stocks ends at 3:15 pm, followed by calculation of a reference price between 3:15 and 3:20 pm. CAS then runs from 3:20 pm to 3:30 pm, with a random closure between 3:28 pm and 3:30 pm.

The applicable price band during the session is plus or minus 3% of the reference price, following which a single equilibrium price is discovered based on the maximum executable quantity.