SEBI Cracks Down on Call Auction Session Manipulations on SENSEX Expiry Days

The Securities and Exchange Board of India (SEBI) passed an ex-parte interim order against entities involved in manipulative trade practices during the Call Auction Session (CAS) on index expiry days at the Bombay Stock Exchange (BSE). The market surveillance system detected artificial price distortion aimed at influencing settlement prices of derivative contracts linked to the SENSEX.

Call Auction Sessions were introduced by SEBI to facilitate fair price discovery during market opening, pre-open sessions, and specific illiquid security trading windows. However, bad actors used high-volume orders and rapid cancellations during the unpriced match period of the CAS to artificially drive contract prices up or down, benefiting their existing positions in the equity derivatives segment.

SEBI invoked Sections 11(1), 11(4), and 11B of the SEBI Act, 1992, alongside provisions of the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations, 2003. The order impounded illicit gains, impounded demat operations, and directed stock exchanges to enhance automated algorithmic alerts for price-volume anomalies during auction windows.

This issue directly aligns with questions on financial sector integrity and market oversight mechanisms. Prelims candidates should know the operational mechanics of Call Auction Sessions, price discovery, and PFUTP regulations. Mains candidates can utilize this case study under GS-III Economy to discuss market manipulation, systemic risks, and algorithmic trading oversight.