Description

SEBI imposed adjudication proceedings against Allo Roy for executing non-genuine reversal trades in illiquid stock options on BSE during April 2014 to September 2015, creating artificial volumes and misleading trading appearance.

Summary

SEBI issued Adjudication Order No. Order/JS/YK/2024-25/31841 against Allo Roy (PAN: ANOPR5262Q) under Section 15-I of the SEBI Act, 1992 for executing non-genuine reversal trades in Illiquid Stock Options on BSE during the period from April 1, 2014 to September 30, 2015. The order was issued for alleged violations of SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.

Key Points

  • SEBI investigation revealed 2,91,643 trades (81.38% of all stock options trades on BSE) involved reversal of buy and sell positions during the investigation period
  • Allo Roy was among 14,720 entities found executing non-genuine trades in BSE’s stock options segment
  • The reversal trades involved entities reversing their buy or sell positions with subsequent opposite positions with the same counterparty
  • These trades allegedly lacked basic trading rationale and created false or misleading appearance of trading volumes
  • Show Cause Notice was issued on August 02, 2022 by the erstwhile Adjudicating Officer
  • Case was transferred to new Adjudicating Officer appointed on April 04, 2025

Regulatory Framework

Alleged Violations:

  • Regulation 3(a), (b), (c), (d) of SEBI (PFUTP) Regulations, 2003
  • Regulation 4(1) and 4(2)(a) of SEBI (PFUTP) Regulations, 2003

Legal Basis:

  • Section 15-I of SEBI Act, 1992
  • Section 15HA of SEBI Act, 1992
  • Rule 3, 4(1) and 5 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995

Investigation Findings

Investigation Period: April 1, 2014 to September 30, 2015

Key Observations:

  • Large scale reversal of trades in Illiquid Stock Options on BSE
  • Creation of artificial volume through non-genuine trades
  • 81.38% of all trades in stock options segment were reversal trades
  • Trades were deemed deceptive and manipulative in nature
  • Pattern showed entities reversing positions with same counterparty, lacking genuine trading rationale

Proceedings Timeline

  • Investigation Period: April 1, 2014 - September 30, 2015
  • Show Cause Notice: August 02, 2022
  • AO Appointment: April 04, 2025 (case transferred to new Adjudicating Officer)

Impact Assessment

This adjudication order is part of SEBI’s broader enforcement action against manipulation in illiquid stock options segment on BSE. The case represents systemic issues in the stock options market during 2014-2015, with over 14,720 entities involved in similar trading patterns. The order reinforces SEBI’s zero-tolerance approach to market manipulation and artificial volume creation, particularly in illiquid derivative contracts. Individual investors and market participants should note SEBI’s strict monitoring of reversal trade patterns that lack genuine economic rationale.

Impact Justification

Individual adjudication order for manipulative trading practices in illiquid stock options. Part of larger investigation involving 14,720 entities during 2014-2015 period.