Sebi unearths manipulations in F&O trading

The Securities and Exchange Board of India (Sebi) today unearthed manipulations in the futures & options (F&O) segment - the first time in derivatives trading - by 10 entities and 14 brokerages including Indiabulls Securities, Angel Capital, SMC Global Capital and Khandwala Financial Services, and warned them to "desist and cease" from such operations.

The 40-page order by G Anantharaman, its whole-time member, said this is not a final order as further investigations are on.

The F&O segment has been attracting huge volumes in recent months with the average daily turnover in the range of over Rs 40,000 crore on the National Stock Exchange.

All the 24 entities were found to have created artificial volumes in the F&O segment during January to March this year by buying and selling equal quantities of contracts within the same day, at a price which was significantly above or below the price at which the first transaction was executed, though there were no significant variations in the traded price of the underlying.

The manipulation, commonly referred as `reversal of trade', implies that for a buy transaction 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.

"It was observed that the transactions were in the nature of fictitious transactions, resulting in creation of a misleading appearance of trading in these options. It also resulted in unusual profit and loss for these entities," the order said.

The 10 entities warned in F&O manipulation are Rakhi Trading, Kasam Holding, Tungarli Tradeplace, Manu Vyapar, Raj Corporation, TLB Securities, Amar Mukeshbhai Shah, Shah Chirag Kirtikumar, Amit Business and Suresh Bharrat have been directed to cease and desist from indulging till further orders.

The other brokerages named in the Sebi investigation are Kumar Share Brokers, CPR Capital Services, Shilpa Stock Brokers, Vibrant Securities, Systematix Shares & Stk (India), Steel City Securities, Ashika Stock Broking, Prashant Jayantilal Patel, PSJ Securities, Pratibhuti Vinihit and Manu Stock Broking.