SEBI lifts broader market ban on JPMorgan’s Copthall and Mansi, but Closing Auction restriction stays

On August 20, the Securities and Exchange Board of India (SEBI) saw two of its previously sanctioned entities – Copthall Mauritius Investment Ltd, a unit of JPMorgan, and Mansi Share & Stock Broking – tender the money it had frozen in connection with alleged Sensex manipulation. By doing so, the regulator lifted the broader market‑access ban that had been imposed after a tumultuous Closing Auction Session (CAS) on August 13.

Copthall shelved roughly ₹2.96 crore, while Mansi paid about ₹71.65 lakh. Those figures represented the “wrongful gains” SEBI said the firms had earned by influencing the Sensex during the auction. The deposit meant the entities could once again trade in the cash market, hold securities, and engage in most normal activities that had been frozen under the August 19 interim order.

However, the regulator made it clear that the ban on participating in the equity segment’s CAS – the short, high‑velocity auction that determines the closing price of stocks – stays in place. SEBI stressed that this restriction is separate from the broader market‑access ban and will remain until a further order is issued.

The backdrop to all this is a dramatic episode on August 13, which happened to be the weekly expiry day for Sensex derivatives. SEBI’s surveillance detected three sharp, sudden jumps in the Sensex’s indicative equilibrium price. The first spike saw the index leap by 362.02 points in just two seconds; the next two movements were 132.67 and 405.08 points respectively.

According to the regulator’s prima‑facie findings, Copthall fired aggressive buy orders across a basket of Sensex constituents, essentially fueling the first two price spikes. Mansi, on the other hand, placed a massive sell order that it promptly cancelled – 12.65 lakh shares out of a total 12.77 lakh offered. The regulator estimated that Copthall’s actions yielded an ill‑gotten profit of ₹2.96 crore, while Mansi’s manoeuvre netted about ₹71.65 lakh.

Interestingly, SEBI did not find any evidence that the two firms colluded. Their attempts to sway the index appeared to be independent, each seeking to benefit its own derivatives positions.

Why keep the CAS ban? SEBI explained that both entities still held open Sensex options that were set to expire the following week. Allowing them back into the auction could have opened the door to a repeat of the questionable trading patterns, potentially jeopardising the fairness of the closing price – a price that serves as the settlement benchmark for countless derivatives contracts.

The CAS mechanism, introduced on August 3, works by ending normal cash‑market trading at 3:15 pm, then entering a reference‑price period followed by the auction. The price that finally emerges is crucial for settling options and futures that expire that day. In the August 13 case, the timing meant that the manipulated auction price could directly affect the settlement of Sensex options expiring the same day.

SEBI has labelled its actions as interim measures while the deeper investigation continues. For now, Copthall and Mansi can operate in the broader market, but they must stay out of the CAS until the regulator decides otherwise.