Description

SEBI adjudication order imposing penalty on Parmeswar Commercial Private Limited for executing non-genuine reversal trades in illiquid stock options at BSE during April 2014 to September 2015.

Summary

SEBI’s Adjudicating Officer issued Order No. Order/AK/DS/2026-27/32359 against Parmeswar Commercial Private Limited (PAN: AADCP8039L) for alleged participation in non-genuine reversal trades in the illiquid stock options segment of BSE. The investigation covered the period April 1, 2014 to September 30, 2015, during which SEBI found large-scale artificial volume creation across the BSE stock options segment.

Key Points

  • SEBI investigated trading in illiquid stock options at BSE for the period April 1, 2014 to September 30, 2015.
  • A total of 2,91,744 trades comprising 81.40% of all BSE stock options trades during the investigation period were found to be allegedly non-genuine.
  • Parmeswar Commercial Private Limited executed 4 non-genuine trades in 2 stock options contracts, resulting in artificial volume of 5,13,250 units.
  • The Noticee is alleged to have violated Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (PFUTP Regulations).
  • A Show Cause Notice was issued on August 25, 2022; the case was subsequently transferred and the undersigned AO was appointed on April 03, 2025.
  • The SCN was served via email on August 11, 2022 and through SPAD with reference number EAD5/AA/45892.

Regulatory Changes

No new regulatory changes are introduced. This order applies existing PFUTP Regulations 2003 to enforce prohibitions against fraudulent and unfair trade practices, specifically reversal trades that create artificial volumes in the stock options market.

Compliance Requirements

  • Market participants must not engage in reversal trades or any trades that create artificial volumes or misleading appearances of trading activity in stock options or any other segment.
  • Entities must comply with SEBI PFUTP Regulations 2003, particularly Regulations 3 and 4, which prohibit manipulative and deceptive trading practices.
  • Firms must respond to SEBI Show Cause Notices within stipulated timelines.

Important Dates

  • Investigation Period: April 1, 2014 – September 30, 2015
  • Show Cause Notice Date: August 25, 2022
  • SCN Email Service Date: August 11, 2022
  • AO Appointment (transfer): April 03, 2025
  • Order Number: Order/AK/DS/2026-27/32359

Impact Assessment

The impact on current market operations is low as the violations pertain to a historical period (2014-2015). However, this order reinforces SEBI’s continued pursuit of entities involved in the illiquid stock options manipulation at BSE, which was a widespread issue involving thousands of trades. The order serves as a deterrent and confirms SEBI’s long-arm enforcement posture. Parmeswar Commercial Private Limited’s role was relatively limited (4 trades, 5,13,250 units of artificial volume) compared to the overall scheme, but the proceedings underscore that even smaller participants in market manipulation will face regulatory consequences.

Impact Justification

Enforcement action against a single entity for historical violations (2014-2015); penalty is significant from a regulatory precedent standpoint but has limited current market impact as it concerns past manipulative trading in illiquid options.