Description

SEBI adjudication order imposing penalty on Tarang Stock Broking Services Private Limited for executing non-genuine reversal trades in Illiquid Stock Options on BSE during April 2014 to September 2015, in violation of PFUTP Regulations.

Summary

SEBI’s Adjudicating Officer issued Order No. Order/JS/VC/2025-26/32151 against Tarang Stock Broking Services Private Limited (PAN: AAACT9338E) for participating in non-genuine reversal trades in the Illiquid Stock Options (ISO) segment of BSE during the investigation period of April 1, 2014 to September 30, 2015. The trades allegedly created artificial volumes and a false appearance of trading activity, in violation of SEBI’s PFUTP Regulations, 2003.

Key Points

  • SEBI investigated large-scale reversal trades in BSE’s Illiquid Stock Options segment for the period April 1, 2014 to September 30, 2015.
  • A total of 2,91,744 trades — comprising 81.41% of all trades in BSE’s stock options segment — were identified as reversal trades involving the same counterparty.
  • 14,720 entities were found to have executed non-genuine trades; Tarang Stock Broking Services Private Limited was among them.
  • Reversal trades were deemed non-genuine as they lacked trading rationale and created artificial volumes.
  • Alleged violations: Regulations 3(a), 3(b), 3(c), 3(d), 4(1), and 4(2)(a) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.
  • A Show Cause Notice was issued on August 06, 2022; the current AO was appointed on April 03, 2025 following transfer of the case.
  • Adjudication proceedings initiated under Section 15HA of the SEBI Act, 1992.

Regulatory Changes

No new regulatory changes introduced. This is an enforcement action under existing PFUTP Regulations, 2003 and Section 15-I / 15HA of the SEBI Act, 1992.

Compliance Requirements

  • Market participants must ensure all trades in derivatives and options segments are genuine and backed by legitimate trading rationale.
  • Entities must avoid executing reversal trades with the same counterparty that create artificial volumes or a misleading appearance of trading activity.
  • Brokers and their clients are liable for violations of PFUTP Regulations even in low-liquidity segments such as Illiquid Stock Options.

Important Dates

  • April 1, 2014 – September 30, 2015: Investigation period for non-genuine ISO trades on BSE.
  • August 06, 2022: Show Cause Notice issued to Tarang Stock Broking Services Private Limited.
  • April 03, 2025: Current Adjudicating Officer appointed following case transfer.
  • 2025-26: Adjudication order passed (Order No. Order/JS/VC/2025-26/32151).

Impact Assessment

This order is part of SEBI’s broader enforcement sweep covering 14,720 entities involved in manipulative ISO trading on BSE between 2014 and 2015. While the market impact is historical and limited to a specific broker, the order reinforces SEBI’s continued commitment to prosecuting manipulation in illiquid derivatives segments. Brokerages with similar historical exposure to BSE ISO trading during the investigation period should review their compliance posture. The case underscores that reversal trades — even in low-liquidity segments — attract significant regulatory scrutiny and penalties under the PFUTP framework.

Impact Justification

Enforcement action against a specific broker for historical manipulation in illiquid stock options; high severity due to deliberate market manipulation but medium impact as it concerns a resolved historical investigation with limited systemic market effect today.