Sebi alleges insider trading in Indian Energy Exchange derivatives

By Savio Shetty

 

India’s market regulator alleged a group of connected traders used unpublished information to bet against Indian Energy Exchange Ltd. via equity derivatives, marking its latest move in a widening crackdown on insider trading.

 

The Securities and Exchange Board of India in an interim order Wednesday said it found well-timed trades and communications suggesting sharing of price-sensitive information in IEX trades, leading to “ill-gotten gains” of ₹173 crore ($20 million).

 

Sebi said that several entities built positions in IEX bearish options ahead of the Central Electricity Regulatory Commission’s July 23 decision, which was seen as a threat to the company’s dominant position in India’s short-term electricity market. IEX shares plunged about 30 per cent the next day, handing large gains to the connected traders, the according to the order.

 

Sebi’s move underscores intensifying enforcement around derivatives activity in the world’s largest equity options market by contracts traded. Earlier this year, the regulator fined individuals for trades in software giant Infosys Ltd. shares and issued one of its largest orders in a long-running case involving former stockbroker Ketan Parekh. 

 

In the IEX case, the largest gain of about ₹72 crore was attributed to Bhoovan Singh, who the regulator said was connected to Yogeita S. Mehra, chief of CERC’s economic division. 

 

Sebi alleged that Singh received confidential updates from Mehra about upcoming regulatory developments, including a market-coupling framework intended to centralize price discovery across power exchanges.

 

The regulator has barred the entities from trading and froze alleged illicit gains pending completion of the investigation. Sebi also said it may attach bank accounts or assets linked to the trades to prevent diversion of funds.