Description

SEBI imposes penalty on Padmavathi Darak for executing non-genuine reversal trades in illiquid stock options at BSE during April 2014 to September 2015, creating artificial volumes.

Summary

SEBI has issued an adjudication order against Padmavathi Darak (PAN: AFMPD1863K) for violations related to trading in illiquid stock options at BSE during the period April 1, 2014 to September 30, 2015. The noticee executed 2 non-genuine reversal trades in 1 stock options contract resulting in artificial volume of 35,000 units. This was part of a larger investigation where 2,91,744 trades (81.40% of all trades) in BSE’s stock options segment were found to be non-genuine, creating artificial volumes. The proceedings were initiated under Adjudication Order No. Order/AK/GN/2025-26/32013.

Key Points

  • Padmavathi Darak charged with executing non-genuine reversal trades in illiquid stock options at BSE
  • Investigation period: April 1, 2014 to September 30, 2015
  • Total artificial trades identified: 2,91,744 trades representing 81.40% of all stock options trades during the period
  • Noticee’s involvement: 2 non-genuine trades in 1 stock options contract creating 35,000 units of artificial volume
  • Alleged violations: Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of PFUTP Regulations, 2003
  • Show Cause Notice issued on January 24, 2022
  • Adjudicating Officer appointed: Ms. S. Gomathi (July 06, 2021), later transferred to another AO (April 04, 2025)
  • Trades alleged to be manipulative and deceptive, creating false or misleading appearance of trading

Regulatory Changes

No new regulatory changes. This order enforces existing provisions under SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003, specifically Regulations 3 and 4 dealing with fraudulent and manipulative trading practices.

Compliance Requirements

  • Market participants must not engage in reversal trades or non-genuine trades that create artificial volumes
  • All trades in stock options must be genuine and not intended to create false or misleading appearance of trading activity
  • Entities must ensure compliance with PFUTP Regulations to avoid manipulative, fraudulent, or deceptive trading practices
  • Trading activities should not create artificial volumes or mislead the market regarding actual trading interest

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • AO Appointment: July 06, 2021 (Ms. S. Gomathi)
  • Show Cause Notice: January 24, 2022
  • Post SCN Intimation: August 17, 2022
  • AO Transfer: April 04, 2025
  • Order Date: January 30, 2026

Impact Assessment

This adjudication order has limited direct market impact as it addresses historical violations from 2014-2015 in the illiquid stock options segment at BSE. However, it demonstrates SEBI’s continued commitment to pursuing cases of market manipulation even for relatively small individual participants (2 trades, 35,000 units). The investigation revealed systemic issues with over 81% of stock options trades being non-genuine during the investigation period, highlighting the extent of manipulation in illiquid segments. The order serves as a deterrent for similar manipulative practices and reinforces the regulatory framework against artificial volume creation and reversal trading schemes. For current market participants, it emphasizes the importance of maintaining genuine trading practices and the long-term consequences of regulatory violations.

Impact Justification

Individual adjudication order for past violations (2014-2015) in illiquid stock options segment. Limited current market impact but demonstrates regulatory action against manipulative trading practices.