SEBI Issues Ex-Parte Interim Order on Manipulative Trades During Call Auction Session on SENSEX Expiry at BSE

Background and Overview

The Securities and Exchange Board of India (SEBI) has passed an ex-parte interim order against two entities for their involvement in manipulative trading during the Closing Auction Session (CAS) on the SENSEX weekly expiry day at the Bombay Stock Exchange (BSE). The order, issued in connection with trading activity on August 13, 2026, represents one of the first major enforcement actions under the newly introduced CAS mechanism, underscoring the regulator’s commitment to market integrity in an evolving trading landscape.

The two entities named in the order are Copthall Mauritius Investment Limited (a JP Morgan group entity) and Mansi Share and Stock Broking Private Limited. SEBI has impounded a total of Rs 3.68 crore in prima facie wrongful gains and restrained both entities from accessing the securities markets until further orders.

What Is the Closing Auction Session (CAS)?

The Closing Auction Session (CAS) is a mechanism introduced by SEBI for the equity cash segment, which came into effect from August 3, 2026, for eligible Futures and Options (F&O) stocks. Under this system, the official closing price of eligible stocks is determined through an auction rather than the previous method of using the Volume Weighted Average Price (VWAP) of the last 30 minutes of trading.

The CAS mechanism works as follows: the reference price for the auction is calculated using the VWAP of trades from 3:00 PM to 3:15 PM (the last 15 minutes of the regular trading session). After this, the CAS runs for approximately 20 minutes from 3:15 PM to 3:35 PM, during which all eligible buy and sell orders are pooled and matched simultaneously at a single equilibrium price known as the Indicative Equilibrium Price (IEP). A price band of plus or minus 3 per cent from the reference price applies during the auction session, and only market and limit orders are permitted.

The mechanism was designed to ensure that closing prices reflect the maximum consensus between buyers and sellers, reducing the possibility that a few trades towards the end of the trading day could disproportionately influence the closing price. This brings Indian markets in line with major global exchanges such as the London Stock Exchange, Euronext, SGX, and Nasdaq, all of which use closing auctions.

The Alleged Manipulation on August 13, 2026

August 13, 2026 was a SENSEX weekly expiry day at the BSE. SEBI’s examination of trading data from the CAS on that day revealed three significant and abnormal spikes in the SENSEX Indicative Equilibrium Price (IEP), each occurring within extremely short time windows.

The three spikes identified by SEBI are as follows:

• First Spike (15:20:41 to 15:20:43): The SENSEX IEP rose by 362.02 points, from 77,661.40 to 78,023.42, in just two seconds.

• Second Spike (15:24:08 to 15:24:20): The IEP surged by 132.67 points within 12 seconds.

• Third Spike (15:25:49 to 15:26:17): The IEP jumped by 405.08 points within 28 seconds.

These movements, ranging from 132 to 405 points within periods of 2 to 28 seconds, were found to be highly unusual and suggestive of coordinated manipulation rather than organic market activity.

Entities Involved and Their Roles

Copthall Mauritius Investment Limited

Copthall Mauritius Investment Limited is a Foreign Portfolio Investor (FPI) and a JP Morgan group entity. According to SEBI’s findings, Copthall placed significant buy orders in SENSEX constituent stocks during the CAS, which had the effect of driving up the IEP. These orders appeared to be strategically timed to coincide with the weekly expiry of SENSEX derivatives, thereby benefiting Copthall’s expiry-day options positions.

SEBI estimated Copthall’s prima facie wrongful gains at Rs 2.96 crore.

Mansi Share and Stock Broking Private Limited

Mansi Share and Stock Broking Private Limited is a domestic broking entity. SEBI’s investigation found that between 15:21:03 and 15:24:59, Mansi placed aggressive sell orders across eight SENSEX constituent stocks, aggregating approximately 12.65 lakh shares. This activity appeared designed to temporarily suppress the SENSEX IEP, which would have benefited Mansi’s expiry-day put option positions.

SEBI estimated Mansi’s prima facie wrongful gains at Rs 71.65 lakh.

SEBI’s Key Findings

SEBI’s examination of the trading patterns on the SENSEX expiry day CAS yielded several critical findings:

• The trading patterns of the two entities were linked to expiry-day SENSEX options positions, indicating a direct financial motive for the manipulation.

• The three IEP spikes were not consistent with normal market activity and were prima facie attributable to the orders placed by the named entities.

• The aggregate volume and timing of orders placed by Mansi across eight SENSEX constituent stocks suggested a coordinated strategy to influence the closing price.

• The manipulation of the SENSEX IEP during the CAS directly affected the settlement prices of SENSEX derivatives, causing potential harm to other market participants.

• The combined prima facie wrongful gains of the two entities totalled Rs 3.68 crore (Rs 2.96 crore for Copthall and Rs 71.65 lakh for Mansi).

Interim Restrictions Imposed by SEBI

Given the urgency and gravity of the situation, SEBI passed an ex-parte interim order (that is, an order issued without prior notice to the affected parties) imposing the following restrictions:

• Impounding of wrongful gains: Rs 2.96 crore from Copthall Mauritius Investment Limited and Rs 71.65 lakh from Mansi Share and Stock Broking Private Limited, totalling Rs 3.68 crore.

• Market access restraint: Both entities have been restrained from accessing the securities markets in any manner until further orders.

• CAS participation ban: Both entities have been prohibited from participating, directly or indirectly, in the equity Closing Auction Session until further orders.

The ex-parte nature of the order indicates that SEBI considered the matter serious enough to warrant immediate action without waiting for the entities to respond, a power exercised under Sections 11(1), 11(4), and 11B of the SEBI Act, 1992.

Legal Framework for the Action

SEBI’s interim order relies on several key legal provisions:

• SEBI Act, 1992 (Sections 11, 11(4), and 11B): These provisions empower SEBI to take measures in the interest of investors and the securities market, including issuing directions to any person associated with the securities market. Section 11(4) specifically grants SEBI the power to pass interim orders pending investigation or inquiry.

• SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 (PFUTP Regulations): These regulations prohibit dealing in securities in a fraudulent manner, market manipulation, and unfair trade practices. Regulation 4(2)(a) specifically addresses manipulating or attempting to manipulate the price of securities.

• Securities Contracts (Regulation) Act, 1956 (SCRA): Provisions prohibiting manipulation of security prices and fraudulent transactions in securities.

Implications for Market Integrity and Surveillance

This order carries significant implications for the Indian securities market, particularly given the recent introduction of the CAS mechanism.

First, the speed of SEBI’s response is noteworthy. The CAS mechanism was introduced on August 3, 2026, and within just ten days, SEBI detected and acted upon an instance of alleged manipulation. This demonstrates SEBI’s heightened surveillance capabilities and its willingness to use ex-parte powers to address emerging threats to market integrity.

Second, the involvement of a Foreign Portfolio Investor (FPI) linked to a major global financial institution raises questions about the adequacy of compliance frameworks at large institutional investors. FPIs operating in Indian markets are expected to adhere to the highest standards of market conduct, and any involvement in manipulative practices could invite heightened regulatory scrutiny of FPI trading patterns more broadly.

Third, the case highlights the vulnerability of newly introduced trading mechanisms to exploitation by sophisticated market participants. As CAS determines the closing price of eligible stocks, any manipulation of the IEP during the auction window can have cascading effects on derivatives settlement, index fund NAV calculations, and portfolio valuations across the market.

Fourth, SEBI’s ability to detect three separate spikes occurring within fractions of seconds underscores the sophistication of its surveillance technology. Market participants should take note that even very short-duration manipulative strategies are now detectable.

Potential Consequences for the Entities

While the current order is interim in nature, the entities face several potential consequences:

• If SEBI’s findings are confirmed after a full investigation, the entities could face monetary penalties under Section 15HA of the SEBI Act (penalty for fraudulent and unfair trade practices), which can extend up to Rs 25 crore or three times the amount of profits made from the manipulation, whichever is higher.

• Criminal prosecution under Section 24 of the SEBI Act, which provides for imprisonment of up to ten years and a fine of up to Rs 25 crore.

• Disgorgement of wrongful gains and potential debarment from the securities market for a specified period.

• For Copthall, being an FPI, there is the additional risk of cancellation or suspension of its FPI registration.

Key Takeaways

• SEBI’s swift action within ten days of the CAS launch sends a strong deterrent signal that manipulation of the new closing price mechanism will not be tolerated.

• Market participants, including FPIs and domestic brokers, must ensure that their trading strategies during the CAS comply with SEBI regulations and do not create artificial price movements.

• The linkage between CAS trading and derivatives expiry positions will remain under close regulatory scrutiny, particularly on weekly and monthly expiry days.

• Compliance teams at brokerages and investment firms should review their internal surveillance frameworks to detect and prevent CAS manipulation risks.

• The entities have the right to file an appeal before the Securities Appellate Tribunal (SAT) against the interim order, and the case will proceed to a full hearing where they will have an opportunity to present their defence.