BSE illiquid stock options: Sebi slaps Rs 10 lakh fine on a firm for fraudulent trade

Markets regulator Sebi Friday slapped a penalty of Rs 10 lakh on Poonam Drums and Containers Pvt Ltd for fraudulent and manipulative trading in illiquid stock options on the BSE.

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

The regulator observed that the entity repeatedly bought and sold stock options and executed reversal trades with the same set of entities for same quantity within a short span of time with substantial price difference.

Sebi noted from the trading pattern of the entity that it was deliberately making repeated losses through reversal trades in stock options which does not make any economic sense and is a blatant misuse of trading platform for creating artificial volume in the illiquid stock options.

The non-genuine and deceptive transactions of entity is prima facie covered under the definition of 'fraud' under PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) regulations and are thereby prohibited, Sebi said.

Accordingly, the regulator imposed a fine of Rs 10 lakh on the firm.

The orders are in line with Sebi's announcement in April 2018 to take action in a phased manner against 14,720 entities for fraudulent trade in the illiquid stock options segment. Since October, the regulator has passed more than 50 orders against such entities.