Description

SEBI adjudication order against Middleton Goods Pvt. Ltd. for executing non-genuine reversal trades in illiquid stock options on BSE during April 2014 to September 2015, violating PFUTP Regulations.

Summary

SEBI has issued Adjudication Order No. Order/JS/VC/2025-26/31746 against Middleton Goods Pvt. Ltd. (PAN: AACCM0757H) for engaging in non-genuine reversal trades in Illiquid Stock Options (ISO) on BSE during the investigation period from April 1, 2014 to September 30, 2015. The investigation revealed that the entity executed reversal trades where buy or sell positions were reversed with the same counterparty, creating false or misleading appearance of trading and artificial volumes. This conduct violated SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.

Key Points

  • SEBI conducted investigation into trading activities in Illiquid Stock Options on BSE for the period April 1, 2014 to September 30, 2015
  • A total of 2,91,744 trades comprising 81.41% of all trades executed in stock options segment of BSE were reversal trades
  • 14,720 entities were found to have executed non-genuine trades in BSE’s stock options segment during the investigation period
  • Middleton Goods Pvt. Ltd. was identified as one of the entities that indulged in execution of reversal trades
  • Reversal trades involved entities reversing their buy or sell position in a contract with subsequent sell or buy position with the same counterparty
  • These trades lacked basic trading rationale and created artificial volume in those contracts
  • Show Cause Notice dated April 12, 2022 was issued to the Noticee
  • Adjudicating Officer was appointed on April 03, 2025 pursuant to transfer from erstwhile AO

Regulatory Changes

No new regulatory changes announced. This order enforces existing SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.

Compliance Requirements

The adjudication proceedings were initiated against Middleton Goods Pvt. Ltd. for alleged violations of:

  • Regulation 3(a), (b), (c), (d) of PFUTP Regulations
  • Regulation 4(1) of PFUTP Regulations
  • Regulation 4(2)(a) of PFUTP Regulations

These provisions relate to prohibition of fraudulent, deceptive and manipulative trade practices that create false or misleading appearance of trading.

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Show Cause Notice issued: April 12, 2022
  • Adjudicating Officer appointed: April 03, 2025
  • Order Number: Order/JS/VC/2025-26/31746

Impact Assessment

This adjudication order is part of SEBI’s broader enforcement action against manipulation in illiquid stock options on BSE. The order pertains to historical violations from 2014-2015 involving reversal trades that created artificial volumes. While this specific order impacts only Middleton Goods Pvt. Ltd., it was part of a larger investigation covering 14,720 entities, demonstrating SEBI’s systematic approach to addressing market manipulation in the derivatives segment. The impact on current market operations is limited as it addresses past conduct, but serves as a deterrent against similar manipulative practices.

Impact Justification

Adjudication order against a single entity for historical violations (2014-2015) in illiquid stock options. High severity due to market manipulation findings but low current impact as it pertains to past activities of one company.