Description

SEBI imposes penalties on Swift Dealmark Private Limited for executing non-genuine reversal trades in illiquid stock options on BSE during April 2014 to September 2015, creating artificial volumes and misleading appearance of trading.

Summary

SEBI has issued an adjudication order (Order/JS/YK/2025-26/31992) against Swift Dealmark Private Limited (PAN: AAPCS1110D) for executing non-genuine reversal trades in illiquid stock options on BSE during the investigation period from April 1, 2014 to September 30, 2015. The entity was found to have engaged in manipulative trading practices that created artificial volumes and false or misleading appearance of trading activity. This case is part of SEBI’s broader investigation into 14,720 entities who executed similar non-genuine trades comprising 81.38% of all trades (2,91,643 trades) in BSE’s stock options segment during the investigation period.

Key Points

  • Swift Dealmark Private Limited executed reversal trades in illiquid stock options on BSE between April 2014 and September 2015
  • Investigation revealed 2,91,643 trades (81.38% of all stock options trades on BSE) involved reversal of buy/sell positions
  • Reversal trades involved entities reversing their buy or sell positions with the same counterparty in the same contract
  • 14,720 entities in total were found to have executed non-genuine trades during the investigation period
  • Trades lacked basic trading rationale and created artificial volumes
  • Show Cause Notice dated August 08, 2022 was issued to the entity
  • Adjudication proceedings initiated under Section 15-I of SEBI Act, 1992
  • Adjudicating Officer appointed via communiqué dated April 04, 2025

Regulatory Changes

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

Compliance Requirements

  • Market participants must ensure trades in stock options have genuine trading rationale
  • Reversal trades with same counterparties that create artificial volumes are prohibited
  • All trading activity must not create false or misleading appearance of trading
  • Entities must avoid manipulative and deceptive trading practices
  • Compliance with regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of PFUTP Regulations, 2003

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Show Cause Notice Date: August 08, 2022
  • Adjudicating Officer Appointment: April 04, 2025
  • Order Number: Order/JS/YK/2025-26/31992

Impact Assessment

Market Impact: This order is part of a large-scale enforcement action targeting manipulative practices in illiquid stock options on BSE. With 81.38% of all stock options trades during the investigation period identified as non-genuine reversal trades involving 14,720 entities, this represents systemic manipulation that distorted market volumes and price discovery in the stock options segment.

Regulatory Impact: Demonstrates SEBI’s continued focus on cleaning up manipulative trading practices in derivatives segments, particularly in illiquid contracts where such manipulation is easier to execute. The scale of the investigation (nearly 15,000 entities) indicates zero tolerance for artificial volume creation.

Operational Impact: Entities trading in stock options, particularly illiquid contracts, must ensure robust systems to prevent reversal trades that could be construed as non-genuine. Brokers and trading members need enhanced surveillance for detecting reversal trade patterns with same counterparties.

Violations Alleged

  • Regulation 3(a) of PFUTP Regulations - Fraudulent devices, schemes or artifices
  • Regulation 3(b) of PFUTP Regulations - Making untrue statements or omitting material facts
  • Regulation 3(c) of PFUTP Regulations - Fraudulent or deceitful acts or course of business
  • Regulation 3(d) of PFUTP Regulations - Manipulative or deceptive practices
  • Regulation 4(1) of PFUTP Regulations - Prohibition of manipulative, fraudulent and unfair trade practices
  • Regulation 4(2)(a) of PFUTP Regulations - Indulging in acts creating false or misleading appearance of trading

Impact Justification

Enforcement action against specific entity for manipulative trading practices in illiquid stock options. Part of broader investigation involving 14,720 entities. Sets precedent for reversal trade manipulation cases but limited direct market-wide impact.