SEBI Confirms Manipulative Trading: ₹5 Lakh Penalty Imposed on Entity for Creating Artificial Volume in BSE Options

SEBI Confirms Manipulative Trading: ₹5 Lakh Penalty Imposed on Entity for Creating Artificial Volume in BSE Options​

The Securities and Exchange Board of India (SEBI) has adjudicated a case involving manipulative trading practices in the illiquid stock options segment of the Bombay Stock Exchange (BSE). In an order dated April 20, 2026, SEBI penalized Parmeswar Commercial Private Limited for executing non-genuine, manipulative reversal trades, resulting in the creation of artificial trading volume.

The Adjudicating Officer noted that the findings establish a clear case of collusion, confirming the entity’s violation of key provisions under the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.

SEBI Adjudication Targets Artificial Volume Creation​

The investigation focused on the trading activities of entities during the period spanning April 1, 2014, to September 30, 2015. SEBI initially observed a large-scale reversal of trades in the stock options segment, noting that such activity could artificially inflate trading volumes.

The inquiry revealed that a significant portion of trades—specifically, 81.40% of all trades executed in the stock options segment during the period—were deemed alleged non-genuine trades. Parmeswar Commercial Private Limited (PAN: AADCP8039L) was identified as a key entity involved in executing these alleged manipulative reversal trades.

SEBI initiated proceedings alleging violation of Regulations 3(a), (b), (c), (d), 4(1), and 4(2)(a) of the PFUTP Regulations. These regulations specifically prohibit manipulative, fraudulent, and unfair trade practices designed to mislead the market.

Evidence Establishes Pattern of Manipulation​

The Adjudicating Officer detailed how the non-genuine nature of the trades was established. The core allegation was that the noticee executed reversal trades—where an entity reverses its buy or sell position with the same counterparty on the same day—without any basic trading rationale.

Crucially, the investigation highlighted a pattern of trade synchronization. In one specific instance, the noticee executed a sell trade for 66,625 units with a counterparty, and then, on the same day, executed a buy trade for the exact same quantity with the same counterparty, but at a vastly different average rate (Rs 5 vs. Rs 35).

These repeated, synchronized transactions, particularly in illiquid option contracts, provided strong circumstantial evidence of a "meeting of minds." The Adjudicating Officer heavily referenced legal precedents, noting that such patterned trading points to prior agreement to execute trades at predetermined prices, rather than genuine market activity.

Compliance and Legal Precedents Guide Findings​

The adjudicatory process confirmed that the principles of natural justice were followed, granting the noticee ample opportunity to reply. However, with no response received, the proceeding was advanced ex-parte.

The findings heavily relied on judicial rulings from the Supreme Court and the Securities Appellate Tribunal (SAT). These judgments established that when manipulative trading is established, no further proof regarding the inducement of investors is required. The focus shifts to the 'preponderance of probabilities' based on the totality of surrounding facts, such as the sheer volume, the short time intervals, and the consistent counterparty involvement.

The comprehensive nature of the evidence confirmed that the noticee’s trading pattern was highly unnatural and indicative of a deliberate effort to manipulate the market volume.

Final Order Imposes ₹5 Lakh Penalty​

After considering all the facts, including the violation of the PFUTP Regulations and the lack of quantifiable disproportionate gains or losses for this specific penalty assessment, the Adjudicating Officer imposed a penalty.

Parmeswar Commercial Private Limited was found guilty of violating Regulations 3(a), (b), (c), (d), 4(1), and 4(2)(a) of the PFUTP Regulations.

The total monetary penalty imposed on the noticee is ₹ 5,00,000/- (Rupees Five Lakhs only).

The noticee has 45 days from receipt of the order to remit the penalty amount via SEBI’s online payment facility. Failure to pay could result in SEBI initiating consequential recovery proceedings, including attachment and sale of movable and immovable properties.