sebi:Order/PM/AB/2019-20/5239

SEBI · SEBI · 2018-04-03 · Prasanta Mahapatra, Adjudicating Officer

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Facts / Headnote

Penalty imposed on Noticee for violation of PFUTP Regulations

Provisions invoked

• s. 15
• s. 15H
• s. 15I
• s. 15J

Regulations

• Reg. 3
• Reg. 2(1)(c)
• Reg. 4(1)
• Reg. 3(a)
• Reg. 4(2)(a)
• Reg. 2(1)(c)(2)
• Reg. 2(1)(c)(7)
• Reg. 2(1)(c)(8)

Holding

The Noticee violated Regulation 3(a), 4(1) and 4(2)(a) of the PFUTP Regulations by executing non-genuine reversal trades in illiquid stock options on BSE, and a penalty of Rs. 5,00,000 was imposed under Section 15HA of the SEBI Act.

Full text

Adjudication Order in the matter of dealing in Illiquid Stock Options at the BSE Page 2 of 13 allegations that the Noticee had violated Regulation 3(a), (b), (c), (d) and Regulation 4(1), 4(2) (a) of the SEBI (Prohibition of Fraudulent and Unfair Trading Practices related to Securities Markets) Regulations, 2003 (hereinafter be referred to as, the “PFUTP Regulations”).

Adjudication Order in the matter of dealing in Illiquid Stock Options at the BSE Page 3 of 13 c) The trades entered by the Noticee were reversed on the same day with same counterparties at a substantial price difference without any basis for significant change in the contract price which indicates that these trades are artificial and are non-genuine in nature. d) A summary of dealings of the Noticee in the 19 Stock Options contracts in which the Noticee executed non-genuine reversal trades during the Investigation Period are as under: Table 1: Summary of trading of the Noticee in Illiquid Stock Options on BSE S. No. Contract Name Avg. Buy Rate (Rs.) Total Buy Volume (no. of units) Avg. Sell Rate (Rs.) Total Sell Volume (no. of units) % of Artificial trades of the Noticee in the contract to Total trades in the contract % of Artificial Volume generated by Noticee in the contract to Total Volume in the Contract 1 ALLD15APR50.00CEW1 11.53 480000 19.65 480000 47% 44% 2 ALLD15APR50.00CEW2 11.22 368000 19.80 368000 24% 26% 3 AMBC15APR230.00CEW1 15.79 299000 24.78 299000 21% 20% 4 ANBK15APR60.00CEW1 11.55 388000 18.99 388000 50% 46% 5 APLT15APR140.00CEW1 13.55 110000 22.50 110000 17% 15% 6 ARVI15APR250.00CEW1 34.90 171000 34.80 171000 13% 18% 7 BHRT15MAR360.00CEW3 13.35 297500 23.35 297500 50% 89% 8 EXID15APR165.00CEW1 11.05 312000 18.85 312000 29% 64% 9 HNDL15APR120.00PEW1 0.05 262000 1.94 262000 25% 22% 10 HNDL15MAR110.00CEW3 13.90 136000 24.95 136000 20% 21% 11 IDEA15APR150.00CEW1

Adjudication Order in the matter of dealing in Illiquid Stock Options at the BSE Page 4 of 13 e) By indulging in execution of aforesaid non-genuine reversal trades, the Noticee has violated Regulations 3(a),(b),(c),(d) and 4(1), 4(2)(a) of the PFUTP Regulations, text of which is reproduced as under: “SEBI (Prohibition of Fraudulent and Unfair Trading Practices Related to Securities Markets) Regulations, 2003

Source: SecMarx — sebi:Order/PM/AB/2019-20/5239. 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.