Description

SEBI adjudication order against Makwana Jitubhai S. HUF for alleged non-genuine reversal trades in illiquid stock options on BSE during April 2014 to September 2015, violating PFUTP Regulations.

Summary

SEBI issued Adjudication Order No. Order/JS/DP/2025-26/31974 against Makwana Jitubhai S. HUF (PAN: AAKHM1435R) under Section 15-I of the SEBI Act, 1992 for alleged violations of PFUTP Regulations. The entity was found to have engaged in non-genuine reversal trades in illiquid stock options on BSE during the investigation period from April 1, 2014 to September 30, 2015. These trades allegedly created false or misleading appearance of trading through artificial volumes.

Key Points

  • Investigation revealed 2,91,744 trades comprising 81.41% of all trades in BSE stock options segment were reversal trades during the investigation period
  • Total of 14,720 entities were found to have executed non-genuine trades in BSE’s stock options segment
  • Makwana Jitubhai S. HUF was one entity that indulged in execution of reversal trades
  • Reversal trades involved entities reversing their buy/sell positions in a contract with subsequent sell/buy position with the same counterparty
  • Such trades allegedly lacked basic trading rationale and were deemed deceptive and manipulative
  • Show Cause Notice dated December 21, 2021 was issued to the Noticee
  • Adjudicating Officer appointed on April 04, 2025 to conduct proceedings

Regulatory Changes

No new regulatory changes introduced. This order enforces existing PFUTP Regulations provisions.

Compliance Requirements

  • Entities must avoid non-genuine reversal trades in stock options that create artificial volumes
  • Trading activities must have legitimate economic rationale
  • Market participants should not engage in trades creating false or misleading appearance of trading
  • Compliance with regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of PFUTP Regulations is mandatory

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Show Cause Notice issued: December 21, 2021
  • Adjudicating Officer appointed: April 04, 2025
  • Order issued: January 2026

Impact Assessment

This is an individual enforcement action against one HUF entity as part of a larger investigation into market manipulation in illiquid stock options. The impact is limited to the specific entity and serves as a deterrent example. The order is part of SEBI’s broader effort to clean up manipulative practices in the stock options segment that occurred during 2014-2015. No immediate market-wide implications, but reinforces regulatory scrutiny on artificial volume creation and reversal trading practices.

Impact Justification

Individual adjudication order against one HUF entity for historical violations (2014-2015). No broader market impact or regulatory changes. Part of larger investigation involving 14,720 entities.