In a first crackdown after the call auction session (CAS) was introduced, SEBI barred two entities-- Copthall Mauritius Investment Ltd, Mansi Share And Stock Broking-- from the securities market after the market regulator allegedly found prima facie evidence of manipulative trading during the auction's expiry on the BSE Sensex on August 13. The regulator restricted them from participating in equity call auction sessions as well.
First Action After CAS Introduced
The order is the capital markets watchdog's first in relation to alleged manipulation during the newly introduced Call Auction Session (CAS) system, which came into effect from August 3.
In an interim order, SEBI said foreign portfolio investors, Copthall Mauritius Investment Ltd and Mansi Shares & Stock Broking Pvt Ltd adopted aggressive and abusive trading strategies during CAS to influence the Indicative Equilibrium Price (IEP) on the Sensex.
Key Observations By SEBI
The regulator said that during the session, the Sensex recorded three sharp movements of 362.02 points, 132.67 points, and 405.08 points within 2 to 28 seconds.
According to the order, Copthall placed large buy orders in Sensex aggregates at prices nearly 3 per cent higher than the reference price.
SEBI stated in the order that during the first spike, it accounted for 99.91 per cent of the total buy-order value, while during the second and third spikes, its buy orders accounted for 96.09 per cent and 85.21 per cent, respectively.
SEBI stated that Mansi Shares and Stock Broking placed sell orders for a total of 12.65 lakh shares across eight Sensex indices at prices below the reference price, and then cancelled the entire block within a few seconds.
The market watchdog said the trading patterns of both entities, as well as their expiry-day Sensex option positions, need to be taken into account. Copthall Mauritius Investment Ltd's put option position could benefit from an upward movement in the index, while Mansi's put option position could benefit from a decline.
Both Entities Attained Wrongful Gains Of Rs 2.96 Crore
SEBI has prima facie calculated incorrect profits of Rs 2.96 crore for Copthall and Rs 71.64 lakh for Mansi Shares & Stock Broking, taking the total profit to Rs 3.67 crore.
As per its interim direction, SEBI has ordered attachment of the amount, barred both entities from accessing the securities market and from participating in Equity CAS until further orders.
The regulator has also directed banks and depositories to prohibit debits from the entities' accounts and transfer or redemption of securities.
CAS Came Into Effect On August 3
The Securities and Exchange Board of India (SEBI) introduced CAS in a circular in January this year, and the framework will come into effect from August 3.
Normal trading for stocks covered under this arrangement ends at 3:15 p.m., after which the reference price is calculated between 3:15 p.m. and 3:20 p.m. CAS then runs from 3:20 p.m. to 3:30 p.m., with a random stop between 3:28 p.m. and 3:30 p.m.
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