How traders allegedly gamed CAS
In today’s Finshots, we talk about the downsides of CAS (Closing Auction Session) and explore whether Indian stock markets can keep manipulation at bay.
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With that out of the way, let’s dive into today’s story.
The Story
Exactly two weeks ago, when the CAS (Closing Auction Session) mechanism kicked off in the stock market, we told you that we had already written about it a year ago, so we’d skip another story on it.
But maybe destiny had other plans. Because just the day before yesterday, market regulator SEBI pulled up two companies, Copthall Mauritius Investment Ltd. and Mansi Share and Stock Broking, for allegedly manipulating the SENSEX’s closing price during the CAS, and seemingly minting ₹3.68 crore from it.
So let’s understand what happened and whether CAS really is the villain everyone thinks it is.
Until July this year, a stock’s official closing price was calculated using the average price (specifically the Volume Weighted Average Price, or VWAP) of all trades in the last 30 minutes of the trading day.
But starting this month, SEBI replaced that system with the CAS. Here, regular trading stops at 3:15 PM for stocks with Futures and Options (F&O) contracts. Then a separate 20-minute auction runs until 3:35 PM, much like the pre-open session used to set opening prices.
During these 20 minutes, traders get specific five-minute windows to place or modify orders. The exchange then pools all the buy and sell orders and finds an “equilibrium price” or simply, the price at which the maximum number of shares can change hands.
You can read how this works in more detail here and here. And that becomes the official closing price, which is then used to calculate index levels, settle F&O contracts and determine mutual fund NAVs.
This is what paved the way for the alleged manipulation last week. Last Thursday (August 13th, 2026) was the weekly expiry of SENSEX options. So the CAS closing level that afternoon directly determined how much traders made or lost on those expiring contracts.
And because Copthall and Mansi held options positions that would gain if the SENSEX moved in their favour, SEBI alleges that they tried to influence that closing level.
So, how did they do it?
Let’s start with Copthall, a Mauritius-based foreign portfolio investor linked to JPMorgan Chase.
During the first two seconds of the CAS, it placed 32 large buy orders across all 30 SENSEX stocks, worth about ₹66 crore. And these weren’t ordinary buy orders. They were placed almost exactly at the maximum price allowed under CAS.
What’s even more interesting as well as suspicious is that Copthall alone accounted for 99.9% of the total buy-order value during those two seconds. That was enough to push the indicative SENSEX level up by 362 points almost instantly.
And Copthall apparently did this not once or twice, but thrice. During the second and third spikes, it again flooded the market with aggressive buy orders accounting for 96% and 85% of all buy orders respectively. Then, once the price had moved up, it cancelled its latest batch of buy orders.
If you’re wondering why, well, Copthall held a combination of option contracts that would benefit if the SENSEX closed higher. So SEBI believes it used aggressive buying in the underlying SENSEX stocks to push the index up and improve the profits it made from those options.
Mansi, meanwhile, played the opposite game. It had bought SENSEX options that would benefit if the index fell. So between 3:21 PM and 3:25 PM, it placed sell orders worth about ₹145 crore across eight SENSEX stocks, often at prices 1.5–3% below their reference prices (the price used by the exchange as the starting point for calculating the indicative closing price during the auction). This kept the SENSEX level artificially lower for about five minutes. Then, within just three seconds, Mansi cancelled almost all those orders, pulling the index down by nearly 233 points.
That apparently helped Mansi exit its put options at a profit instead of letting them expire worthless.
Which tells you that both players seem to have exploited the CAS to benefit their own option positions.
But wait. Wasn’t CAS introduced to prevent precisely this kind of manipulation? So how did this happen? And does it mean CAS itself is a bad idea?
Well, everything has its downsides. And CAS is no exception.
As you’ve seen, CAS pools all orders into a single 15–20 minute window, with far fewer participants than a full trading session, and uses them to find one “equilibrium” price. Unlike the old VWAP method, which averaged thousands of trades over 30 minutes, a call auction’s single closing price can be heavily influenced by just one or two large participants if genuine competing orders are scarce.
That’s exactly what SEBI found in the Copthall case, where one entity accounted for 85–99% of the buy-order value during the spikes that moved the SENSEX.
There’s another problem too. CAS currently allows traders to cancel orders almost until the end of the order-entry period. So a trader can flood the order book with large buy or sell orders to push the indicative price up or down, and then cancel most of them once they get the outcome they want, without ever intending to trade. This is known as spoof and pull.
But there are ways to make CAS harder to manipulate.
For instance, SEBI could look at a few global exchanges that have safeguards designed to prevent exactly this kind of behaviour.
The NYSE, for example, has a freeze ten minutes before the close. After that, orders can no longer be cancelled or changed, except for genuine keying errors verified by exchange staff. This directly shuts the loophole that Copthall and Mansi are accused of exploiting.
Thailand’s SET has a slightly different approach. It randomly picks a closing time between 4:35 and 4:40 PM, making it much harder for traders to time orders around the exact close.
Hong Kong does something similar. Its closing auction ends at an unpredictable time between 4:08 and 4:10 PM, while cancellations are prohibited after 4:06 PM.
See something common here?
Every one of these exchanges either has some form of a no-cancellation window or a surprise closing time within a particular window. The idea is that traders shouldn’t know exactly when the auction will end or be able to pull off their orders at the last moment and game the closing price.
Now, it’s not as if India doesn’t have similar safeguards. Right now, the order-entry period can close randomly at any point during the last two minutes before 3:30 PM. And between 3:25 PM and 3:30 PM, some orders can’t be cancelled or modified.
But notice we said “some orders” because only market orders are locked in. Limit orders can still be changed or cancelled.
So perhaps the solution is to extend the no-cancellation rule to limit orders too, at least during the final few minutes before the random cutoff.
The only caveat here, or rather, the reason this isn’t extended to limit orders as well, is that limit orders play an important role in price discovery. Unlike a market order that says, “I’ll trade at whatever price the auction finds.”, a limit order says, “I’ll trade, but only around this price.”
During the auction, traders can keep adjusting their limit orders as they see the indicative price and the gap between buyers and sellers change. That helps the auction gradually decide on a fair price where the maximum number of shares can actually trade.
But if those orders are frozen too early, everyone will have to submit a price and then sit back and wait. That could make the final price less accurate.
There’s another reason SEBI may be hesitant to extend the no-cancellation rule to limit orders. And that is CAS already has a participation problem. Early data according to Bernstein suggests that trading in the final window currently accounts for just 1.6–2.3% of daily NSE turnover, compared with 10% under the old VWAP system. So participation has fallen sharply since CAS began. A no-cancellation rule for limit orders could potentially make that worse.
So yeah, in the end you could say that SEBI actually has a solution that it could implement. But it’s probably just waiting for the right time.
Until then…
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