Sebi fines two entities for 'non-genuine trades' in illiquid stock options

Markets regulator Sebi has slapped a penalty of Rs 5 lakh each on two entities for engaging in non-genuine transactions, which created a misleading impression of trading in illiquid stock options segment.

Those facing penalties are -- Kalpesh Vinubhai Gajjar and Ketan Ramanlal Shah HUF.

The Securities and Exchange Board of India (Sebi) conducted an investigation into the trading activity in illiquid stock options at BSE between April 2014 to September 2015 after observing large scale reversal of trades in the stock options segment of the BSE.

In separate orders, Sebi said that the manner of placing buy and sell orders in a synchronised manner within seconds of each other, reversal of the trades within a short time on the same day, and wide variation in prices of the trades in the same contract in a short time without any basis for such wide variation all indicate that the trades executed by Gajjar and Shah HUF were not genuine trades.

"I find that the reversal trades executed by the noticee (the two entities) were not genuine trades and being non-genuine, created an impression of artificial trading volumes in the respective contracts.

"By engaging in such trades, the noticee violate provisions of ...PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations," Sebi Adjudicating Officer Maninder Cheema said in similar-worded orders on Wednesday.

In the same case, Sebi had earlier levied a fine of Rs 5 lakh on Prakashchandra Chunilal Jagawat for indulging in execution of reversal trades in stock options with same entities on the same day, leading to false and misleading appearance of trading in the illiquid stock options at BSE.

In April, Sebi had announced to take action in a phased manner against 14,720 entities for 'non-genuine trades' through illiquid stock option segment.

The regulator had said that adjudication proceedings have been initiated against 567 entities involved in such trades in the first phase.