Sebi conducted an investigation between April 2014 and September 2015 into the trading activity in illiquid stock options on the BSE and observed that the majority of volume generated in the bourse’s stock option segment was artificial volume which was created by execution of trade reversal.
The probe found that the entities were among those that had bought and sold option contracts with the same counter parties and also reversed their trades in less than few minutes from its earlier buy or sell trades, at substantial price difference, Sebi noted in separate orders.
“The said reversal trades are non-genuine as they are not executed in normal course of trading, lacks basic trading rationale and lead to false or misleading appearance of trading in terms of generation of artificial volume, hence are deceptive and manipulative,” Sebi said in similarly worded separate orders.
The trading practices of the entities are in violation of the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) regulations, Sebi said.
Consequently, Sebi imposed a penalty of Rs 5 lakh each on the 14 entities through separate orders.
The orders are in accordance 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. SRS HRS
News credit : Indiatimes