Matching trades with the same counterparty is not a coincidence but an outcome of concurrence -The Security and Exchange Board of India
SEBI observed large scale reversal trades in stock options and Ms. Arpita Sikaria(Notice)was found suspicious of creating false and misleading trades and was given show cause notice the present proceedings were conducted in response to those proceedings and an adjudicating officer was appointed section 15I read with 15HA of the SEBI Act, 1992 and rule 3 of SEBI adjudication rules,1995 and AMIT KAPOOR was appointed in the [ADJUDICATION ORDER NO. Order/AK/JS/2021-22/14784]
An investigation was conducted and it was observed that a total of 2,91,643 trades comprising 81.38% of all trades executed in the stock options segment and these trades resulted in the creation of artificial volume to the tune of 826.21 crore units or 54.68% of the total market volume in stock options segment of BSE during the Investigation Period the allegations were made against the noticee for violation of Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of SEBI Regulations,2003
The show-cause notice was given to noticee asking for noticee response as to why an inquiry should not be initiated against the Noticee and why penalty should not be imposed upon the Noticee. the noticee responded and the proceeding started to know the validity of the response of the Noticee .
The allegations were that the noticee executed reversal trades and these reversal trades are alleged to be non-genuine trades as they are not executed in the normal course of trading, lack basic trading rationale, lead to a false or misleading appearance of trading in terms of generation of artificial volumes, and hence are deceptive & manipulative. The non-genuineness of these transactions executed by the Noticee is evident from the fact that there was no commercial reason behind the point that why noticee reversed the trades in a short period of time. this short span show gives a clear indication that there was pre-determination in the prices by the counterparties while executing the trades. the officer notes that it is not mere coincidence that Noticee could match her trades with the same counterparty with whom it had undertaken the first leg of the respective trades. This is the outcome of the meeting of minds between noticee and her counterparties and relied on the judgment of SEBI v Kishore R Ajmera (AIR 2016 SC 1079).
The trading behaviors also confirms that such trades were not normal and the wide variation in prices of the trades in the same contract in almost no time without any basis for such wide variation, all indicate that the trades executed by the Noticee were not genuine and being non-genuine, created an appearance of artificial trading volumes in the said contract. and relies on the case of SEBI Vs. Shri Ram Mutual Fund  68 SCL 216(SC)
The above observations make it clear that noticee was involved in the reversal of trades and have violated Regulations 3(a), (b), (c), (d), 4(1), and 4(2)(a) of SEBI Regulations,2003 and a penalty of Rs. 5,00,000 was imposed under Section 15-I of the SEBI Act read with Rule 5 of the Adjudication Rules.
Order reviewed by Naveen Sharma