Description

SEBI issues adjudication order against Prem Sanghai for executing non-genuine reversal trades in BSE's Illiquid Stock Options segment during April 2014 to September 2015.

Summary

SEBI has issued an adjudication order against Prem Sanghai (PAN: ALCPS8701M) for engaging in manipulative trading practices in BSE’s Illiquid Stock Options segment. The investigation covered the period from April 1, 2014 to September 30, 2015, during which Sanghai executed reversal trades that created artificial volume and false appearance of trading activity.

Key Points

  • Investigation revealed 2,91,744 reversal trades comprising 81.40% of all trades in BSE Stock Options during the investigation period
  • 14,720 entities were involved in executing non-genuine trades in BSE’s Stock Options segment
  • Reversal trades involve entities reversing buy/sell positions in contracts with the same counterparty
  • Such trades lack basic trading rationale and create misleading appearance of trading activity
  • Prem Sanghai was identified as one of the entities involved in these manipulative practices

Regulatory Changes

This order reinforces SEBI’s enforcement of existing PFUTP Regulations, specifically:

  • Regulations 3(a), (b), (c), (d) - prohibiting fraudulent and unfair trade practices
  • Regulations 4(1) and 4(2)(a) - dealing with manipulative and deceptive devices

Compliance Requirements

  • Market participants must ensure all trades have genuine commercial rationale
  • Entities must avoid creating artificial volume through reversal trades
  • Trading practices must not create false or misleading appearance of market activity
  • Compliance with PFUTP Regulations is mandatory for all market participants

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Initial AO Appointment: September 20, 2021
  • Show Cause Notice: October 26, 2021
  • Current AO Appointment: September 6, 2024
  • Order Date: August 5, 2025

Impact Assessment

This enforcement action demonstrates SEBI’s commitment to maintaining market integrity in derivatives segments. The identification of widespread manipulative practices (81.40% of trades being reversal trades) highlights significant market abuse that undermined genuine price discovery. The action serves as a deterrent to other market participants engaging in similar practices and reinforces the importance of genuine trading activities in maintaining fair and transparent markets.

Impact Justification

Individual enforcement action demonstrating SEBI's continued focus on detecting and penalizing manipulative trading practices in derivatives markets