Description

SEBI imposes penalty on Rajender Singh Chhatwal for executing non-genuine reversal trades in illiquid stock options on BSE during April 2014 to September 2015, violating PFUTP regulations.

Summary

SEBI issued an adjudication order against Rajender Singh Chhatwal (PAN: AKDPS8856M) for executing non-genuine reversal trades in illiquid stock options on BSE during the period April 1, 2014 to September 30, 2015. The investigation revealed that 81.38% of all trades in BSE’s stock options segment during this period were reversal trades involving 14,720 entities. Chhatwal was found to have created false or misleading appearance of trading by reversing buy/sell positions with the same counterparty, leading to artificial volume creation. The order was issued under Section 15-I of the SEBI Act, 1992 for violations of PFUTP Regulations.

Key Points

  • Total of 2,91,643 trades comprising 81.38% of all BSE stock options trades during investigation period involved reversals
  • 14,720 entities executed non-genuine trades in BSE’s stock options segment
  • Rajender Singh Chhatwal identified as one of the entities executing reversal trades
  • Reversal trades involved entities reversing their buy or sell positions with the same counterparty
  • Such trades lacked basic trading rationale and created artificial volume
  • Proceedings initiated under Order No. Order/JS/YK/2025-26/31892
  • Investigation period: April 1, 2014 to September 30, 2015

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 avoid executing reversal trades that create false or misleading appearance of trading
  • Trades in stock options must have genuine trading rationale
  • Trading activities should not create artificial volumes in derivatives contracts
  • Entities must comply with regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of PFUTP Regulations

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Show Cause Notice issued: July 23, 2021
  • Adjudicating Officer appointed: April 4, 2025
  • Order Date: December 19, 2025

Impact Assessment

This adjudication order has limited market-wide impact as it pertains to historical violations from 2014-2015 by an individual entity. However, it demonstrates SEBI’s continued commitment to pursuing enforcement actions against manipulative trading practices in the derivatives segment, even for violations that occurred several years ago. The order serves as a deterrent for market participants considering similar non-genuine trading strategies in illiquid stock options. The investigation revealed systemic issues in BSE’s stock options segment during that period, with over 81% of trades being non-genuine reversal trades involving thousands of entities.

Impact Justification

Individual adjudication order for historical violations (2014-2015) with limited market-wide impact, but indicates SEBI's continued enforcement against manipulative trading practices in derivatives segment.