Markets regulator Sebi on Tuesday imposed a penalty of over Rs 24 lakh on Vision Sponge Iron for indulging in fraudulent trading in the illiquid stock options segment on the BSE.
The order comes after the Securities and Exchange Board of India (Sebi) observed large scale reversal of trades in illiquid stock options segment on BSE, leading to creation of artificial volume.
Following this, the regulator conducted a probe into the trading activities of certain entities in illiquid stock options segment on BSE for April 2014 to September 2015 period, and found that Vision Sponge Iron indulged in creating artificial volume of 7,99,57,400 units through 544 non-genuine trades in 165 stock option contracts.
It further said that this pattern of trades continued for 47 days.
Accordingly, Sebi has imposed a penalty of Rs 24.10 lakh on the company for violation of the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations "for indulging in execution of reversal trades in stock options with same entity on the same day, thereby creating artificial volume, leading to false and misleading appearance of trading in the illiquid stock options at BSE."
Reversal trades are those trades in which an entity reverses its buy or sell positions in a contract with subsequent sell or buy position with the same counter party during the same day.
Such trades are non-genuine as they are not executed in normal course of trading, lack basic trading rationale and also lead to false or misleading appearance of trading in terms of generation of artificial volume.
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