SEBI Examines Closing Auction Trades After Nifty Swings Raise Market Manipulation Concerns
· Free Press Journal
The Securities and Exchange Board of India (SEBI) is reviewing trades conducted during the Closing Auction Session (CAS) on Aug 3 and Aug 4 to check whether any transactions involved market manipulation.
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According to a report by Moneycontrol, the regulator has sought trading details from stock exchanges for the first two sessions after the introduction of the new closing mechanism. Exchanges have provided the required information, and SEBI is currently examining the data.
SEBI reviews sharp Nifty movements during CAS
The review aims to determine whether the significant difference between index levels before and after the auction period was part of normal market activity or resulted from trades intended to influence closing prices.
Sensex, Nifty Show Diverging Trade For Second Day After Implementing CAS MechanismOn the first day of CAS, the Nifty was trading around 24,573 at 3:28 pm before rising nearly 201 points to about 24,774 by 3:30 pm. On Aug 4, the index moved from around 24,463 at 3 pm to nearly 24,615 at 3:15 pm, gaining about 152 points.
Market participants have raised concerns that lower liquidity during the auction period could increase the possibility of price manipulation, particularly in stocks or indices with limited cash-market participation.
Experts said a large investor or group of traders could potentially take positions in an index while simultaneously investing in passive funds, expecting index-linked buying to influence prices during the auction window.
SEBI Defends Closing Auction Transition, Says New System Will Improve Price Discovery & Market ConsistencyRegulator focuses on orderly market functioning
Participants, however, said proving manipulation may require establishing clear intent behind the trades. Simply identifying transactions that affected index movements may not be sufficient unless there is evidence of coordinated action aimed at influencing closing prices.
SEBI has been monitoring trading activity closely and has also asked brokers to encourage greater retail participation during the auction session. Brokers have also been instructed to display indicative prices clearly on trading platforms.