SEBI Impounds ₹3.68 Cr for Manipulative CAS Trading

The Securities and Exchange Board of India (SEBI) has impounded gains totaling ₹3.68 crore from two entities, Copthall Mauritius Investment and Mansi Share and Stock Broking. This decisive action follows allegations of manipulative trading during the closing auction session (CAS) on a BSE options expiry day, August 13.

Regulatory Enforcement and Restrictions

In an interim directive, SEBI ordered both firms to establish fixed deposits for the impounded sums, creating a lien in the regulator’s favor. They were also barred from participating in the securities market and specifically from CAS.

Depositories received instructions to prevent any debits from their demat accounts without prior SEBI approval. The impounded amounts reflect the gains each entity allegedly secured:

• Copthall Mauritius Investment: ₹2.96 crore
• Mansi Share and Stock Broking: ₹71.65 lakh

Unusual Market Spikes Trigger Investigation

SEBI’s investigation began after observing three unusual upward spikes in the BSE index during the CAS, occurring within a tight six-minute window, despite an overall downward market trend. The trading patterns of the implicated entities, involving buy orders placed above the reference price and sell orders below it, diverged significantly from typical investor behavior.

These unusual movements in the index were recorded as follows:

• First spike: 362 points
• Second spike: 133 points
• Third spike: 405 points

Copthall’s Manipulative Actions Detailed

Copthall was found to have placed 32 buy orders for 3.17 million shares, valued at ₹66.57 crore, which constituted 99.91% of the total order value. The firm subsequently cancelled 1.04 million shares.

These orders, strategically placed across Sensex constituents near the upper CAS limit, were instrumental in causing the first index spike. Copthall further contributed to the second and third spikes by repeatedly placing numerous large limit buy orders and then rapidly cancelling them.

Mansi’s Role and Market Distortion

Mansi Share and Stock Broking also played a part in the third spike by cancelling a substantial portion of its sell orders, which had been placed below the reference price. Both entities held positions that benefited from the artificially inflated Sensex.

Copthall held net buy call and net sell-put positions, allowing it to either profit or avoid significant payouts due to the upward movement. Similarly, Mansi Broking gained from its put positions that would have otherwise expired worthless.

The manipulative trades caused the BSE Sensex to close at 78,080 on August 13, rather than its unmanipulated value of 77,840. SEBI continues its broader investigation into a 451-point decline in the Sensex observed during the same CAS, looking for other potential manipulative activities.