SEBI Reports 768 Settlements for Alleged Non-Genuine Stock Options Trades On BSE

A total of 768 entities settled cases pertaining to alleged non-genuine trades at the stock options segment on the BSE with SEBI under the settlement scheme introduced in 2024, the markets regulator said on Monday.

The regulator introduced the SEBI Settlement Scheme, 2022, allowing entities to settle their cases. After the scheme closed, the regulator continued legal proceedings against those who did not participate. Some of these entities challenged the decisions by appealing to the Securities Appellate Tribunal.

During a hearing in Sept. 2023, the Tribunal directed that if a new settlement scheme is introduced in the future, the appellants would be eligible to benefit from it, and the scheme would cover their cases.

Accordingly, Securities and Exchange Board of India introduced the 'ISO Settlement Scheme, 2024' to provide an opportunity to the entities against whom proceedings had been initiated and appeals against the proceedings are pending before any forum or authority.

The scheme was initially kept open from March 11 to May 10, but was extended to June 10 considering the interest of a large number of entities to avail of the benefit.

"A total of 768 entities availed of the benefit of the scheme and remitted the specified settlement amount and legal cost, respectively," SEBI said in its settlement order. Most entities paid either Rs 1.2 lakh or Rs 2.4 lakh as settlement charges.

Accordingly, SEBI said, "The proceedings that have been initiated and are pending before any forum or authority for the violations... be settled qua the applicants (768)."

As part of the surveillance, the SEBI had noted several instances of trades by a set of entities trading in the options segment of certain stocks listed on the BSE.

These trades appeared to be abnormal since they were consistently found to result in significant losses and were then reversed with the same set of counterparties, either on the same day or the next day.

The regulator conducted an analysis of the stock options segment of the BSE from April 1, 2014, to Sept. 30, 2015, after which it was confirmed that several entities were consistently incurring significant losses through their trades, while several others were consistently making significant profits, by executing reversal trades in the stock options segment on the BSE.

It was observed that the trading was carried out in the illiquid options of certain scrips in the F&O segment of the BSE.

It was further noted that of the 21,652 entities that had executed trades on the BSE Stock Options Segment, 14,720 entities were involved in the generation of artificial volumes by executing non-genuine or reversal trades on the same day, in violation of Prohibition of Fraudulent and Unfair Trade Practices rules.