The Securities and Exchange Board of India (Sebi) has impounded gains of Rs 3.68 crore made by two entities, Copthall Mauritius Investment and Mansi Share and Stock Broking, through alleged manipulative trades during the closing auction session (CAS) on August 13, an options expiry day on BSE. The gains of both entities stood at Rs 2.96 crore and Rs 71.65 lakh, respectively.

In an ex-parte interim order, Sebi directed the entities to open fixed deposits in their names to credit the respective amounts and mark a lien in favour of the market regulator. It also barred them from securities market and CAS, and ordered depositories to ensure no debit was made from their demat accounts without Sebi’s permission.

The manipulative trades came into Sebi’s notice after BSE recorded three abnormal upward spikes despite being on a downward trajectory during CAS. The index moved from 77,661 to 78,023 (362 points), 77,708 to 77,841 (133 points) and 77,788 to 78,193 (405 points), within six minutes.

The transactions came under scrutiny as the entities placed buy orders above and sell orders below the reference price, contrary to the normal investor behaviour of seeking to buy low and sell high.

Sebi found that Copthall placed 32 buy orders for 3.17 million shares worth Rs 66.57 crore, accounting for 99.91% of the total order value, and subsequently cancelled orders for 1.04 million shares. The orders, placed across all Sensex constituents, were near the upper permissible CAS limit of 3% above the reference price, triggering the first spike.

Copthall also placed 108 of 165 limit buy orders worth Rs 126.59 crore during a 12-second period, accounting for 96.1% of the total order value, contributing to the second spike. It subsequently placed 32 buy orders worth 85.2% of the total order value across BSE stocks within 28 seconds, contributing to the third spike, before quickly cancelling the orders.

Sebi said Mansi Share and Stock Broking also contributed to the third spike by cancelling sell orders. It had placed sell orders worth ₹145.65 crore, 1.5-3% below the reference price, in Reliance, SBI, Eternal, ICICI Bank, L&T and Infosys within five minutes and subsequently cancelled 99.06% of the orders.

The regulator also found that Copthall held net buy call and net sell-put positions at the 77,500, 78,000 and 78,500 strikes expiring on August 13. The upward movement in the Sensex could therefore have generated unlimited profits or helped avoid significant payouts to put buyers, Sebi said.

On the other end, Mansi Broking had a call position at 77,800 strike price and put positions at 77,800, 77,900 and 78,000 strikes expiring on August 13. The manipulative trades led to Mansi profiting in its put positions that would have otherwise expired worthless.

The regulator noted that due to these manipulative trades, BSE Sensex closed at 78,080 instead of 77,840 on August 13, based on the movement in the Nifty.

Sebi said it is also examining a sharp 451-point decline in the Sensex during the same closing auction for possible manipulative trading.