Sebi fines six entities ₹30 lakh in illiquid stock options case

Securities and Exchange Board of India (Sebi) has imposed a penalty of ₹5 lakh each on six entities, totalling ₹30 lakh, for non-genuine trades in illiquid stock options at the BSE.

In six separate orders, the watchdog has levied a fine of ₹5 lakh each on Lotwala Mikil Vijaykumar HUF, Rajendra Kumar Jain, Rajendra D Thakkar, Abhishek Agarwal, Radha A Gupta and Bimla Devi Mundra.

The market regulator observed large-scale reversal of trades in stock options segment of the BSE. It noted that such large-scale reversal of trades in stock options leads to creation of artificial volume at BSE.

Following the observation, Sebi investigated the trading activities of certain entities in illiquid stock options at BSE for the period between April 2014 and September 2015.

Pursuant to the investigation, it was observed that over 2.91 lakh trades comprising substantial 81.38 per cent of all the trades executed in stock options segment of the BSE during the investigation period were non-genuine trades.

The non-genuine trades resulted into creation of artificial volume to the tune of 826.21 crore units or 54.68 per cent of the total market volume in stock options segment of the BSE.

It was observed that these eight entities were among the various entities which indulged in execution of reversal trades in stock options segment of the BSE.

According to Sebi, these entities were instrumental in the creation of artificial volume in the illiquid stock option contracts at BSE during the investigation period by executing reversal or non-genuine transactions in the illiquid stock options segment at the exchange.

By indulging in such trades, they violated the provisions of the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms, Sebi said in six separate orders passed during December 3-8.