Sebi to tie up with Guj govt, police to address 'dabba trading' issue

A dabba or offf-exchange trade is illegal and risky, and exists only on the books of the dabba or the trader

Capital market regulator Securities and Exchange Board of India (SEBI) is concerned with rampant 'dabba trading' and has assured strong action to address the issue, said, U K Sinha, chairman, SEBI here on Tuesday. He said this on the sidelines of conference for SME funding in Rajkot.

Dabba trading is generally carried out illegally outside the purview of the market regulator. The difference between an official and a dabba trading is that the legal one gets executed on the exchanges, whereas the illegal one exists only on the books of the dabba or the trader. Also called off-exchange trading, dabba transactions are risky and illegal. The Forward Markets Commission, which supervises the functioning of commodity exchanges in the country, says that according to the Forward Contracts (Regulation) Act, such trading is illegal.

Sinha held discussions with local brokers in Saurashtra and Kutch region and they brought the issue of 'dabba trading' in the region to his notice.

Sinha said, "It has come to my knowledge that particularly in this region, volume of dabba trading is very high compared to other states and it is a very serious matter. SEBI will take strong action against it."

SEBI will hold talks with the state government and police department in this regard and urge them to take actions. It is also considering to collaborate with police department of various states to address this issue.

SEBI had organized an interactive seminar with Saurashtra-based small and medium scale entrepreneurs (SME) for 'SME funding: Role of capital markets' in collaboration with Small Industries Development Bank of India (SIDBI) and National Stock Exchange (NSE).

Talking about finance, he advised entrepreneurs that banks are still the strongest options but when engaged in business, other options for finance too must be considered.

"We are now working on what Indian SME needs in terms of finance and this seminar is part of it. We are here to discuss what kind of reforms are required," said Sinha.

He also received some negative feedback regarding the regulator's functioning. On it, he said that the complaints would be first verified and appropriate rectification will be carried out if required.

Daily volume of dabba trading is more than Rs 1,500-2,000 crore. This volume is almost 25 per cent of the regular volume.