Sebi slaps Rs 25 lakh fine on Yochana for fraudulent trading activities

Capital markets regulator Sebi has imposed a penalty of Rs 25 lakh on Yochana Vyapaar Pvt Ltd for indulging in fraudulent trading in illiquid stock options segment on the BSE.

Trading activities of certain entities in the illiquid stock options segment on the exchange had come under the scanner of the watchdog, which conducted an investigation for the April 1, 2014 to September 30, 2015 period.

During that period, Sebi observed that a total 2,91,643 trades comprising substantial 81.38 per cent of all the trades executed in stock options of the BSE were non-genuine trades.

Yochana Vyapaar (noticee) was one of the entities who had indulged in creating artificial volume of 6,90,99,386 units through 614 non-genuine trades in 219 stock option contracts, as per the regulator.

In its order, dated August 11, Sebi said this pattern of trades continued for 39 days.

The trades by the noticee were non-genuine in nature and created a misleading appearance of trading in illiquid stock option contracts, Sebi said, adding that Yochana Vyapar indulged in creation of artificial volumes by way of reversal of trades in illiquid options contracts, where wider market participation was not involved in the trades.

The trades were such that one of the counterparty books a profit while the other counterparty books a loss. Hence, it would be appropriate to consider the impact of these transactions between the two counterparties in totality, Sebi noted.

While imposing a fine of Rs 25 lakh on the entity, the regulator also said that such persistent trading pattern, which was fraudulent and deceptive, affects the normal price discovery mechanism in the securities market.

"People who indulge in manipulative, fraudulent and deceptive transaction, or abet the carrying out of such transaction which are fraudulent and deceptive should be suitably penalised for such acts of omissions and commissions," it added.