sebi:WTM/GA/16/ISD/06/2007
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Facts / Headnote
cease and desist direction till further orders, subject to replies and final view
Provisions invoked
- s. 11B
- s. 19
Regulations
- Reg. 7
- Reg. 3
Holding
The Whole-Time Member directed the named clients and brokers to cease and desist from the described reversal/synchronized F&O transactions till further orders, pending consideration of their responses and a final view.
Full text
2 opposite party. Reversal of trade implies that where a buy transaction has been initially entered into by a broker for a particular client for a specific quantity, there is a corresponding sale transaction which takes place during the day for the same quantity between the same set of broker/clients and vice versa. However, it was pertinent to note that the difference in the prices at which the above two trades were executed was very significant whereas such differences were not observed in the price of the underlying shares. It was also observed that there were several brokers who were trading in the F & O contracts in a synchronized manner during the period. Additionally, it was also seen that one of the parties to the transactions apparently had substantial gains while the other party suffered losses in such transactions. Such gains and losses are termed as Close out Difference (COD) and transactions are called reversal of trades.
3 In the above situation, the same broker is undertaking transactions on behalf of both the buying as well as selling clients. He is buying say X number of contracts at a price P at time T1 and thereafter reversing the transactions on behalf of the same set of clients by selling X number of contracts at price P1 at time T1.
4 difference in prices for the first and the subsequent counter trades The transactions undertaken are discussed herein under
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Source: SecMarx — sebi:WTM/GA/16/ISD/06/2007. 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.