Trade Reversal: 1,018 entities avail Sebi’s one-time settlement scheme

By: |
January 15, 2021 6:18 PM

It was observed that there were several entities which consistently made significant losses, whereas there were others which consistently made significant profits by executing reversal trades in stock options on BSE.

Accordingly, Sebi decided to introduce a settlement scheme in illiquid stock options cases.Accordingly, Sebi decided to introduce a settlement scheme in illiquid stock options cases.

Markets regulator Sebi on Friday said 1,018 entities, allegedly involved in manipulation of illiquid stock options, availed the benefit of its one-time settlement scheme.

The one-time settlement scheme, which commenced on August 1, expired on December 31. Earlier, it was scheduled to end on October 31, but the regulator extended the date in view of the large-scale disruption caused by the COVID-19 pandemic.

Under the scheme, those entities which executed trade reversals on stock options segment of BSE during April 1, 2014 to September 30, 2015 period and against whom any proceedings were pending were eligible to avail the settlement opportunity.

“A total of 1,018 entities have availed the benefit of the scheme and remitted the specified settlement amount,” Sebi said in an order.

The cases have been settled against the entities after they paid settlement charges in the range of Rs 5 lakh to Rs 42 lakh.

“The proceedings that have been initiated or may be initiated for the defaults … be settled qua the applicants (1,018 entities),” the regulator mentioned in the settlement order.

As part of its ongoing surveillance, Sebi had come across several instances wherein a set of entities was consistently making losses by trading in options on individual stocks listed on BSE.

It noted that trading of these entities appeared abnormal because they were consistently seen to be making significant losses by their trades, which were reversed with the same counterparties either on the same day or the next day.

Accordingly, an analysis of the stock options segment of BSE for April 1, 2014 to September 30, 2015 the period was carried out.

It was observed that there were several entities which consistently made significant losses, whereas there were others which consistently made significant profits by executing reversal trades in stock options on BSE.

Out of 21,652 entities that executed trades on BSE stock options segment, a total of 14,720 entities were involved in generation of artificial volumes by executing non-genuine or reversal trades on the same day. Out of these 14,720 entities, Sebi had initiated adjudication proceedings against 567.

Meanwhile, the Securities Appellate Tribunal (SAT), through an order in October 2019, in the matter of RS Ispat Ltd directed Sebi to consider holding a Lok Adalat or adopting any other alternative dispute resolution process with regard to the illiquid stock options.

Accordingly, Sebi decided to introduce a settlement scheme in illiquid stock options cases.

Any entity desirous of making an application for one-time settlement under the scheme was required to submit a settlement application along with an application fee of Rs 15,000 in case of individuals and Rs 25,000 in case of body corporates in the specified format.

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