Description

SEBI imposes penalty on Primesoft Dealer Pvt. Ltd. (now Aleit Advisory Pvt. Ltd.) for executing non-genuine reversal trades in illiquid stock options on BSE during April 2014 to September 2015.

Summary

SEBI has issued an adjudication order against Primesoft Dealer Pvt. Ltd. (PAN: AAFCP4566Q), which has since been renamed to Aleit Advisory Pvt. Ltd., for engaging in manipulative and deceptive trading practices in the Illiquid Stock Options (ISO) segment on BSE. During the investigation period from April 1, 2014 to September 30, 2015, the entity executed non-genuine reversal trades that created artificial volumes and false appearance of trading activity. This case is part of a larger investigation where 2,91,744 trades (81.41% of all trades in BSE’s stock options segment) were identified as reversal trades involving 14,720 entities.

Key Points

  • Investigation revealed large-scale reversal of trades in Illiquid Stock Options on BSE during April 1, 2014 to September 30, 2015
  • Total of 2,91,744 trades (81.41% of all trades) in stock options segment were reversal trades
  • Reversal trades involved entities reversing their buy/sell positions with the same counterparty
  • 14,720 entities were found to have executed non-genuine trades during the investigation period
  • Primesoft Dealer Pvt. Ltd. was one of the entities that indulged in reversal trades
  • Company name was changed from Primesoft Dealer Pvt. Ltd. to Aleit Advisory Pvt. Ltd. (per MCA data)
  • Show Cause Notice was issued on July 29, 2021
  • Case was transferred to new Adjudicating Officer on April 03, 2025

Regulatory Changes

No new regulatory changes introduced. This order enforces existing provisions under:

  • Regulations 3(a), (b), (c), (d) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003
  • Regulations 4(1) and 4(2)(a) of PFUTP Regulations
  • Section 15-I and 15HA of SEBI Act, 1992

Compliance Requirements

  • Entities must ensure genuine trading rationale for all transactions in stock options
  • Trading practices must not create false or misleading appearance of trading activity
  • Reversal trades with the same counterparty that lack economic rationale are prohibited
  • Entities must avoid creating artificial volumes in illiquid securities
  • Market participants should maintain proper documentation justifying trading decisions

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Show Cause Notice Issued: July 29, 2021
  • Adjudicating Officer Appointed: April 03, 2025
  • Order Number: Order/JS/VC/2025-26/31846

Impact Assessment

Market Impact: The order addresses historical market manipulation in the illiquid stock options segment of BSE. The identification of 81.41% of trades as non-genuine reversal trades indicates significant manipulation during the investigation period. This enforcement action demonstrates SEBI’s commitment to maintaining market integrity even in less liquid segments.

Operational Impact: This case is part of a broader crackdown involving 14,720 entities, signaling heightened scrutiny of trading patterns in illiquid derivatives. Market participants engaged in stock options trading should review their trading practices to ensure compliance with PFUTP regulations and avoid patterns that could be construed as creating artificial volumes.

Precedent Value: The case establishes that reversal trades lacking basic trading rationale will be considered manipulative and deceptive, even in illiquid segments where such practices might have been more common. The long timeline from investigation (2014-2015) to adjudication (2025) indicates SEBI’s persistent pursuit of market manipulation cases.

Impact Justification

Adjudication order against a single entity for historical market manipulation in illiquid stock options segment. Part of broader investigation involving 14,720 entities. Sets precedent for regulatory action against non-genuine trading practices but limited current market impact.