Description

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

Summary

SEBI has issued an adjudication order (Order/AK/GN/2025-26/31824) against Alternative Dealers Private Limited (PAN: AAICA2613G) for executing non-genuine trades in illiquid stock options at BSE. During the investigation period from April 1, 2014 to September 30, 2015, the entity executed 6 non-genuine trades in 2 stock options contracts resulting in artificial volume of 4,19,000 units. The entity is alleged to have violated PFUTP Regulations 2003, specifically Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a). The adjudication proceedings were initiated following SEBI’s investigation which found that 2,91,744 trades (81.40% of all trades) in the stock options segment during this period were non-genuine, creating artificial volumes.

Key Points

  • Alternative Dealers Private Limited executed 6 non-genuine reversal trades in 2 stock options contracts at BSE
  • Artificial volume created: 4,19,000 units during the investigation period (April 1, 2014 to September 30, 2015)
  • SEBI’s broader investigation found 2,91,744 trades (81.40% of total) were non-genuine in stock options segment
  • Show Cause Notice issued on August 02, 2022
  • Adjudication Order Number: Order/AK/GN/2025-26/31824
  • Undersigned appointed as Adjudicating Officer on April 04, 2025 (transferred from Mr. N Hariharan appointed July 26, 2022)

Regulatory Changes

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

Compliance Requirements

  • Market participants must refrain from executing reversal trades that create artificial volumes
  • Trading activities must not create false or misleading appearance of trading in securities
  • Entities must avoid manipulative and deceptive trading practices in stock options segments
  • Compliance with PFUTP Regulations 2003, particularly Regulations 3 and 4

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Show Cause Notice issued: August 02, 2022
  • Initial AO appointment: July 26, 2022 (communicated July 27, 2022)
  • Transfer of AO: April 04, 2025
  • Adjudication Order: December 2025

Impact Assessment

Market Impact: Limited current market impact as this relates to historical violations from 2014-2015. However, it demonstrates SEBI’s continued vigilance against market manipulation in derivatives segments.

Regulatory Impact: Reinforces SEBI’s enforcement of PFUTP Regulations against creation of artificial volumes through reversal trades, particularly in illiquid stock options where such manipulation is easier to execute.

Operational Impact: Serves as a deterrent for market participants considering similar manipulative practices. The significant finding that 81.40% of trades in the stock options segment during the investigation period were non-genuine highlights the scale of manipulation that occurred and SEBI’s commitment to addressing such violations even years after occurrence.

Impact Justification

Adjudication order against a specific entity for historical violations (2014-2015) in illiquid stock options. Medium importance as it represents enforcement action but limited broader market impact given the specific nature and historical period.