Description

SEBI adjudication order against Ratan Lal Rathi for executing non-genuine reversal trades in illiquid stock options on BSE during April 2014 to September 2015, creating artificial volumes and false appearance of trading.

Summary

SEBI has issued an adjudication order against Ratan Lal Rathi (PAN: AJSPR3863P) for alleged violations related to executing non-genuine reversal trades in Illiquid Stock Options (ISO) on BSE during the investigation period from April 1, 2014 to September 30, 2015. The investigation revealed large-scale reversal of trades creating artificial volumes, with 2,91,744 trades (81.41% of all stock options trades) involving position reversals. The noticee was one of 14,720 entities found to have executed such non-genuine trades, which allegedly created false or misleading appearance of trading and lacked basic trading rationale.

Key Points

  • Investigation period: April 1, 2014 to September 30, 2015
  • Total reversal trades during IP: 2,91,744 (81.41% of all BSE stock options trades)
  • Total entities involved: 14,720 entities executed non-genuine trades
  • Noticee: Ratan Lal Rathi (PAN: AJSPR3863P)
  • Alleged violations: Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of PFUTP Regulations, 2003
  • Reversal trades involved entities reversing buy/sell positions with same counterparty in same contract
  • Trades allegedly lacked trading rationale and created artificial volumes
  • Show Cause Notice issued: September 6, 2021
  • Adjudicating Officer appointed: April 3, 2025
  • Order Number: Order/JS/VC/2025-26/31999

Regulatory Changes

No new regulatory changes introduced. This order enforces existing provisions under SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.

Compliance Requirements

  • Market participants must avoid executing reversal trades that lack genuine trading rationale
  • Trades must not create false or misleading appearance of trading activity
  • Entities must not engage in manipulative or deceptive trading practices that generate artificial volumes
  • Trading activities in illiquid stock options must reflect genuine market intent

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Show Cause Notice Date: September 6, 2021
  • Adjudicating Officer Appointment: April 3, 2025
  • Order Date: January 30, 2026

Impact Assessment

This adjudication order has minimal current market impact as it addresses historical violations from 2014-2015. The order is part of SEBI’s broader enforcement action against 14,720 entities involved in manipulative trading in illiquid stock options on BSE. The case demonstrates SEBI’s continued efforts to address market manipulation and maintain market integrity, even for historical violations. The order serves as a deterrent against creating artificial volumes through non-genuine reversal trades. Impact is limited to the individual noticee, though it reinforces broader regulatory expectations for genuine trading behavior in derivatives markets.

Impact Justification

Individual adjudication order for historical violations (2014-2015) involving one entity's manipulative trading in illiquid stock options. Limited current market impact as it addresses past misconduct and affects only the noticee.