Sebi fines 3 entities for fraudulent trade in stock options

Markets regulator Sebi Tuesday imposed a total fine of Rs 16 lakh on three entities for executing fraudulent trades, which created artificial volume in the illiquid stock options segment of the BSE.

Those facing penalties are -- Omnipresent Credits Private Limited, Payal Commercial Company and Pavan Kailashchand Biyan, according to Sebi orders.

The regulator conducted an investigation into the trading activities of certain entities in illiquid stock options at the BSE from April 2014 to September 2015 after observing large scale reversal of trades in the bourse's stock options segment.

The probe found that these entities had bought and sold option contracts with the same counter parties and also reversed its trades in less than few minutes from its earlier buy or sell trades, at substantial price difference.

Such pattern of dealings suggests beyond doubt that they were not driven by market factors as none of the parameters (underlying stock price, volatility among others) for option pricing have undergone any change.

"Trades of noticee (the three entities) were non-genuine and have created false or misleading appearance of trading in terms of artificial volume in stock options and therefore manipulative, deceptive in nature," Sebi said in similar-worded orders.

By engaging in such trades, these entities violated provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, it added.

Accordingly, the regulator has levied a fine of Rs 5 lakh each on Omnipresent Credits and Biyan, and Rs 6 lakh on Payal Commercial.

In April, Sebi announced to take action in a phased manner against 14,720 entities for fraudulent trade in illiquid stock options segment and passed several orders in past few weeks against such entities.