Description

SEBI adjudication order against Rudramukhi Infrastructure Private Limited for executing non-genuine reversal trades in illiquid stock options at BSE during April 2014 to September 2015.

Summary

SEBI issued an adjudication order against Rudramukhi Infrastructure Private Limited (PAN: AAGCR0172D) for alleged violations related to non-genuine trading in illiquid stock options at BSE. The entity allegedly executed 14 non-genuine trades in 6 stock options contracts during the investigation period from April 1, 2014 to September 30, 2015, resulting in artificial volume of 23,28,000 units. The case was initiated following SEBI’s investigation into large-scale reversal of trades in BSE’s stock options segment, where 2,91,744 trades (81.40% of all trades) were found to be allegedly non-genuine.

Key Points

  • Rudramukhi Infrastructure Private Limited executed 14 alleged non-genuine trades in 6 stock options contracts at BSE
  • The trades resulted in artificial volume creation of 23,28,000 units during the investigation period
  • Investigation period covered April 1, 2014 to September 30, 2015
  • Overall, 2,91,744 trades comprising 81.40% of all trades in BSE stock options segment during the period were allegedly non-genuine
  • The entity engaged in reversal trades that created false or misleading appearance of trading
  • Show Cause Notice (SCN) issued on August 8, 2022 under reference EAD-8/AS/AK/38688/1/2022
  • Ms. Asha Shetty initially appointed as Adjudicating Officer on August 18, 2021
  • Case transferred and new Adjudicating Officer appointed on April 3, 2025

Regulatory Changes

No new regulatory changes introduced. This is an enforcement action applying existing regulations.

Compliance Requirements

  • Market participants must ensure all trades executed in stock options are genuine and not designed to create artificial volumes
  • Entities must avoid reversal trades that create false or misleading appearance of trading activity
  • Trading activities must comply with SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Adjudicating Officer Appointment: August 18, 2021 (Ms. Asha Shetty)
  • SCN Communication: September 30, 2021
  • Show Cause Notice Issued: August 8, 2022
  • Case Transfer/New AO Appointment: April 3, 2025
  • Order Date: November 2025 (based on document publication)

Impact Assessment

Market Impact: Medium - While the case involves significant manipulation (81.40% of trades in stock options segment being non-genuine), it relates to historical activity from 2014-2015 in the illiquid stock options segment at BSE, limiting current market impact.

Entity Impact: High - Rudramukhi Infrastructure Private Limited faces adjudication proceedings under Section 15HA of SEBI Act for violations of Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of PFUTP Regulations, with potential monetary penalties.

Regulatory Significance: The order demonstrates SEBI’s continued focus on addressing market manipulation through non-genuine trades and artificial volume creation, even for historical violations. It serves as a deterrent for similar practices in derivatives segments.

Alleged Violations

  • Violation of Regulation 3(a) of PFUTP Regulations (no person shall directly or indirectly engage in fraudulent trade practices)
  • Violation of Regulation 3(b) of PFUTP Regulations (dealing in securities not based on market mechanism)
  • Violation of Regulation 3(c) of PFUTP Regulations (price manipulation)
  • Violation of Regulation 3(d) of PFUTP Regulations (misleading statements)
  • Violation of Regulation 4(1) of PFUTP Regulations (prohibition of manipulative, fraudulent and unfair trade practices)
  • Violation of Regulation 4(2)(a) of PFUTP Regulations (entering into transactions creating false or misleading appearance of trading)

Impact Justification

Adjudication order against a single entity for past violations (2014-2015) in illiquid stock options. While severity is high due to market manipulation charges, impact is medium as it affects one entity and relates to historical trading activity.