Adjudication Order in respect of Morisson Traders and Developments Pvt., Ltd., in the matter of dealings in Illiquid Stock Options at BSE

Last updated: 19 October 2020

Court :
SEBI

Brief :
Securities and Exchange Board of India (hereinafter be referred to as, the “SEBI”) conducted investigation into the trading activity in illiquid stock options on BSE Limited (hereinafter be referred to as, the “BSE”) for the period April 01, 2014 to September 30, 2015 (hereinafter be referred to as, the “Investigation Period”) after observing large scale reversal of trades in the Stock Options segment of the BSE.

Citation :
ADJUDICATION ORDER NO. PM/NR/2020-21/9402

BEFORE THE ADJUDICATING OFFICER
SECURITIES AND EXCHANGE BOARD OF INDIA
ADJUDICATION ORDER NO. PM/NR/2020-21/9402
UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH RULE 5 OF SECURITIES AND EXCHANGE BOARD OF INDIA (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES) RULES, 1995

In respect of:
Morissons Traders and Developments Pvt., Ltd.,
PAN: AACCM2137M

In the matter of Dealings in Illiquid Stock Options at the BSE

FACTS OF THE CASE
1. Securities and Exchange Board of India (hereinafter be referred to as, the “SEBI”) conducted investigation into the trading activity in illiquid stock options on BSE Limited (hereinafter be referred to as, the “BSE”) for the period April 01, 2014 to September 30, 2015 (hereinafter be referred to as, the “Investigation Period”) after observing large scale reversal of trades in the Stock Options segment of the BSE.

2. The investigation revealed that during the Investigation Period, a total of 2,91,643 trades comprising 81.38% of all the trades executed in the BSE Stock Options Segment were trades which involved reversal of buy and sell positions by the clients and counterparties in a contract. It was observed that Morisson Traders and Developments Pvt., Ltd., (hereinafter be referred to as, the “Noticee”) was one such client whose reversal trades involved squaring off open positions with a significant difference without any basis for such change in the contract price. The aforesaid reversal trades allegedly resulted into generation of artificial volumes, leading to allegations that the Noticee had violated the provisions of Regulation 3(a), (b), (c), (d) and Regulation 4(1), 4(2) (a) of the SEBI (Prohibition of Fraudulent and Unfair Trading Practices related to Securities Markets) Regulations, 2003 (hereinafter be referred to as, the “SEBI PFUTP Regulations”).

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