SEBI fines 2 firms for fraudulent trade in BSE stock options

The two entities are Bhiragacha Finance Company and Blue Bird Mercantiles Pvt Ltd, according to Sebi's two separate but similarly worded orders.

By PTI  
Friday, February 22, 2019

Markets regulator Sebi Thursday slapped a total penalty of Rs 13 lakh on two entities for non-genuine trades in illiquid stock options on the BSE.

The two entities are Bhiragacha Finance Company and Blue Bird Mercantiles Pvt Ltd, according to Sebi's two separate but similarly worded orders.

The Securities and Exchange Board of India (Sebi) conducted an investigation into the trading activity in illiquid stock options on the BSE from April 2014 to September 2015 after observing large-scale reversal of trades in the bourse's stock options segment.

The regulator observed that the entities deliberately adopted strategy to enter into reversal trades with same counterparties and that too at price incurring losses to them.

"Facts shows that these trades were executed with precision to match with the same counterparty to create artificial volume in these contracts, and create misleading appearance of trading," Securities and Exchange Board of India (Sebi) said.

The act of creating artificial volume, violates the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms, the regulator said.

Accordingly, Sebi imposed a fine of Rs 8 lakh on Blue Bird Mercantiles and Rs 5 lakh on Bhiragacha Finance.

The orders are in line with Sebi's announcement in April 2018 to take action in a phased manner against 14,720 entities for fraudulent trade in the illiquid stock options segment. Since October, the regulator has passed more than 55 orders against such entities.

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