sebi:EAD-7/BJD/BKM/2018-19/2015

SEBI · SEBI · B J Dilip, Adjudicating Officer

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Violation established; penalty of Rs 6,00,000 imposed under Section 15HA of SEBI Act, 1992

Provisions invoked

• s. 15
• s. 19
• s. 15H
• s. 15I
• s. 15J
• s. 15I(1)

Regulations

• Reg. 3
• Reg. 4
• Reg. 2(1)(c)
• Reg. 3(a)

Parties

• Prognosis Securities Limited

Holding

The Noticee violated Regulations 3(a), 3(b), 3(c), 3(d), 4(1) and 4(2)(a) of PFUTP Regulations by executing 68 non-genuine reversal trades in 21 illiquid stock option contracts creating artificial volume. A monetary penalty of Rs 6,00,000 under Section 15HA of SEBI Act was imposed on Prognosis Securities Limited.

Full text

Adjudication Order in respect of Prognosis Securities Limited Page 2 of 23 3. It was observed that the said non- genuine trades were not restricted to any specific contract or between any specific set of entities. It was observed that Prognosis Securities Limited (hereinafter referred to as “Noticee”) was one of the various entities which were indulged in execution of non-genuine trades in Stock Options Segment of BSE during the investigation period. The following points narrate the dealings of the Noticee during the investigation period and the allegations against him for execution of non-genuine trades.

Adjudication Order in respect of Prognosis Securities Limited Page 3 of 23 S. No Contract Name Avg. Buy Rate (Rs.) Total Buy Volume (no. of units) Avg. Sell Rate (Rs.) Total Sell Volume (no. of units) Numb er of non genuin e trades execut ed by Entity in the Contra ct Total numb er of trades execu ted by the Entit y in the Contr act Total numb er of trades execu ted in the contr act % of Non Genuine trades of Noticee in the contract to Noticee’s Total trades in the Contract % of Non Genuine trades of Entity in the contract to Total trades in the Contract % of Artificial Volume generated by Noticee in the contract to Noticee’s Total Volume in the Contract % of Artificial Volume generated by Noticee in the contract to Total Volume in the Contract 7 IDBI15OCT55.00CEW1 9.00 140000 12.55 140000 5 5 7 100% 71% 100% 70% 8 IDEA15OCT140.00CEW1 1.50 500000 7.00 500000 2 2 2 100% 100% 100% 100% 9 INCM15OCT65.00CEW1 6.64 416000 11.65 416000 9 9 12 100% 75% 100% 68% 10 INCM15SEP85.00PE 8.09 132000 12.11 132000 5 5 16 100% 31% 100% 33% 11 JSWE15OCT85.00CEW1 4.05 260000 8.50 260000 2 2 2 100% 100% 100% 100% 12 LNTF15OCT55.00CEW1 7.88 188000 11.27 188000 2 4 20 50% 10% 81% 19% 13 NMDC15SEP90.00CEW3 9.81 98000 15.00 98000 4 4 4 100% 100% 100% 100% 14 RCOM15OCT65.00CEW1 0.75 264000 3.15 264000 2 2 4 100% 50% 100% 79% 15 SAIL15OCT60.00PEW1 5.20 124000 9.20 124000 3 3 9 100% 33% 100% 82% 16 SAIL15OCT60.00PEW2 5.50 164000 10.48 164000 2 3 12 67% 17% 73% 34% 17 STAC15MAR1110.00PE 26.70 65000 59.30

Adjudication Order in respect of Prognosis Securities Limited Page 4 of 23 c) A substantial 5% to 100% of volumes generated by the Noticee in each of the above contracts were artificial volume, and further artificial volume generated by it also contributed to significant contribution of the total volume from the market in said contracts. d) Non genuine trades executed by the Noticee in above contracts had significant differential in buy rates and sell rates considering that the trades were reversed on same day.

Source: SecMarx — sebi:EAD-7/BJD/BKM/2018-19/2015. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.