New Delhi

TheSecurities and Exchange Board of India (SEBI) has issued its first interim order alleging manipulation of trades in the Closing Auction Session (CAS), raising concerns over the vulnerability of the new mechanism introduced on stock exchanges earlier this month.

The order pertains to trading on August 13, the weekly expiry day for SENSEX derivative contracts. SEBI has named Copthall Mauritius Investment Ltd and Mansi Share and Stock Broking Pvt Ltd as noticees, alleging that they used aggressive orders in the cash market to influence the SENSEX and benefit from their derivatives positions.

The Closing Auction Session was introduced from August 3. It begins after normal cash-market trading ends at 3:15 pm, with a reference price established between 3:15 pm and 3:20 pm. The auction then runs from 3:20 pm to 3:30 pm to determine the closing prices of eligible stocks. Since SENSEX constituents can move sharply during this period, such movements can have a direct impact on the index’s final closing level and the value of expiry-day options.

According to SEBI, the SENSEX reference price on August 13 stood at 77,829.60, while the index eventually closed at 78,080. The regulator identified three sharp upward spikes in the index during the auction, along with a broader downward movement.

In the first episode, the SENSEX jumped 362.02 points in around two seconds. A second spike pushed the index up by 132.67 points in about 12 seconds, while a third episode saw the index rise 405.08 points in just 28 seconds.

SEBI alleged that Copthall was responsible for the upward pressure in the index. The regulator said the firm placed aggressive buy orders at the maximum permissible limit of 3 per cent above the reference price across SENSEX constituent stocks.

During the first spike, Copthall accounted for 99.91 per cent of the total buy-order value, amounting to Rs 66.57 crore. In the second episode, its share was 96.09 per cent of total buy orders worth Rs 126.59 crore. In the third episode, Copthall placed buy orders worth Rs 98.12 crore. The regulator said Copthall cancelled its latest buy orders at 3:26:21 pm, suggesting that the orders were not placed with a genuine intention to acquire the underlying shares.

SEBI also alleged that Mansi Share and Stock Broking sought to push the SENSEX in the opposite direction. According to the order, the broker placed sell orders for 12.65 lakh shares across eight SENSEX constituents, with a total value of Rs 143.43 crore, at prices substantially below the reference price.

The regulator said 99.06 per cent of these sell orders were cancelled within seconds after the downward pressure on the index had been created.

SEBI linked the alleged cash-market activity to the derivatives positions held by the two entities. Copthall had synthetic long positions through calls and puts at the 77,500, 78,000 and 78,500 strikes, while Mansi held net buy Put positions at the 77,800, 77,900 and 78,000 strikes.