Description

SEBI imposes penalty on Anil N Pacholi 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 Anil N Pacholi (PAN: BWCPP6583Q) 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 investigation revealed that 81.38% of all trades executed in BSE’s stock options segment (2,91,643 trades) were reversal trades involving entities reversing their buy/sell positions with the same counterparty. Anil N Pacholi was one of 14,720 entities found to have engaged in such manipulative trading practices that created artificial volumes and false appearances of trading activity.

Key Points

  • Investigation covered the period April 1, 2014 to September 30, 2015 for illiquid stock options trading on BSE
  • 2,91,643 reversal trades identified, comprising 81.38% of all trades in BSE stock options segment
  • 14,720 entities participated in non-genuine reversal trades during the investigation period
  • Anil N Pacholi executed reversal trades where buy/sell positions were reversed with same counterparties
  • Such trades lacked basic trading rationale and created artificial volume
  • Show Cause Notice issued on February 10, 2022 by erstwhile Adjudicating Officer
  • Case transferred to new Adjudicating Officer on April 4, 2025
  • Adjudication Order Number: Order/JS/RJ/2025-26/32017

Regulatory Changes

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

Compliance Requirements

  • Market participants must ensure all trades in stock options have genuine economic rationale
  • Entities must avoid executing reversal trades with same counterparties that create artificial volumes
  • Trading activities must not create 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: February 10, 2022
  • Transfer of case to new Adjudicating Officer: April 4, 2025
  • Adjudication Order Date: February 2026 (publication date)

Impact Assessment

Market Impact: Low - This is an individual enforcement action with no immediate market-wide implications. The violations occurred in 2014-2015 and the matter has been under adjudication since 2022.

Operational Impact: Low - Specific to individual trader; no changes to market operations or trading systems required.

Precedent Value: Medium - Reinforces SEBI’s continued enforcement against manipulation in illiquid stock options segment and serves as deterrent for reversal trading practices that create artificial volumes.

Sector Affected: Stock options trading segment, particularly illiquid contracts on BSE.

Impact Justification

Individual adjudication order with limited market-wide impact, but significant for enforcement precedent on illiquid stock options manipulation