Description

SEBI adjudication order against Arrowlink Chemical Private Limited for executing non-genuine reversal trades in illiquid stock options segment at BSE during April 2014 to September 2015, creating artificial volumes.

Summary

SEBI issued an adjudication order (Order/AK/RK/2025-26/31799) against Arrowlink Chemical Private Limited (PAN: AAKCA1933D) under Section 15-I of SEBI Act, 1992 for executing non-genuine reversal trades in illiquid stock options at BSE. During the investigation period (April 1, 2014 to September 30, 2015), the entity executed 6 non-genuine trades in 2 stock options contracts, creating artificial volume of 656,000 units. The case was part of a larger investigation where 291,744 trades (81.40% of all stock options trades at BSE) were identified as non-genuine, creating artificial volumes in the stock options segment.

Key Points

  • Arrowlink Chemical Private Limited charged with executing reversal trades in illiquid stock options at BSE
  • Investigation period: April 1, 2014 to September 30, 2015
  • Entity executed 6 non-genuine trades in 2 stock options contracts
  • Artificial volume created: 656,000 units
  • Broader investigation found 291,744 non-genuine trades comprising 81.40% of all stock options trades at BSE during the investigation period
  • Alleged violations of PFUTP Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a)
  • Trades alleged to be manipulative and deceptive, creating false or misleading appearance of trading
  • Adjudicating Officer initially appointed: Sh. Suresh Menon (August 18, 2021)
  • Case transferred to new Adjudicating Officer on April 3, 2025

Regulatory Changes

No new regulatory changes introduced. This is an enforcement action under existing SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.

Compliance Requirements

  • Market participants must ensure all trades in stock options are genuine and not executed merely to create artificial volumes
  • Reversal trades that create false or misleading appearance of trading activity are prohibited
  • Entities must comply with PFUTP Regulations prohibiting manipulative and deceptive trading practices
  • Trading activities should not involve execution of non-genuine trades to inflate volumes artificially

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Initial AO Appointment Order: August 18, 2021
  • Communication of AO Appointment: September 30, 2021
  • Show Cause Notice Issued: March 31, 2022 (SCN Reference: EAD-1/SBM/VS/14422/2022)
  • Transfer of Case to New AO: April 3, 2025
  • Order Date: November 24, 2025

Impact Assessment

This adjudication order is part of SEBI’s enforcement actions against systematic manipulation in illiquid stock options segment at BSE during 2014-2015. While the specific entity involved had limited trading activity (6 trades), the broader investigation revealed widespread market manipulation with over 81% of stock options trades being non-genuine during the investigation period. The order demonstrates SEBI’s continued focus on cleaning up historical cases of market manipulation and serves as a deterrent against creating artificial volumes through reversal trades. The impact on current markets is minimal as this addresses historical violations, but reinforces compliance standards for derivatives trading and market integrity.

Impact Justification

Historical adjudication case from 2014-2015 investigation period involving illiquid stock options manipulation. Limited current market impact as it addresses past violations by a single private entity with relatively small volume (6 trades, 656,000 units).