The Securities and Exchange Board of India (SEBI) has imposed a penalty of ₹5 lakh on Aastha Ruia Beneficial Trust for executing non-genuine reversal trades in illiquid stock options on the Bombay Stock Exchange.
According to an adjudication order dated 3 September 2026, the trust executed six reversal trades across three stock-option contracts. These transactions generated an artificial volume of 2,58,000 units.
SEBI concluded that the trading pattern was manipulative and deceptive and created a false or misleading appearance of activity in the market. The regulator consequently held that the entity violated multiple provisions of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.
The order offers an important lesson for investors: a transaction executed through a registered broker and recognised exchange is not automatically compliant. The intention, timing, price, counterparty and overall trading pattern can still attract regulatory scrutiny.
Background of SEBI’s Investigation
SEBI observed large-scale reversal trading in the stock-options segment of BSE during the period from 1 April 2014 to 30 September 2015.
Its investigation found that 2,91,744 trades, representing approximately 81.41% of all trades executed in the relevant segment during the investigation period, were allegedly non-genuine. According to SEBI, these transactions created artificial trading volume in illiquid stock options.
Aastha Ruia Beneficial Trust was identified as one of the entities involved in such reversal transactions. SEBI therefore initiated adjudication proceedings for alleged violations of Regulations 3(a), 3(b), 3(c), 3(d), 4(1) and 4(2)(a) of the PFUTP Regulations.
A show-cause notice was issued to the entity on 2 August 2022, calling upon it to explain why an inquiry should not be conducted and why a monetary penalty should not be imposed under Section 15HA of the SEBI Act.
What Are Reversal Trades?
A reversal trade generally occurs when an entity buys or sells a security or derivative contract and subsequently reverses that position with the same counterparty, often on the same day.
Not every reversal trade is necessarily unlawful. The regulatory concern arises when transactions lack a genuine commercial rationale and are executed with unusual precision in terms of time, quantity, price and counterparty.
In the present case, SEBI found that the trust repeatedly reversed its positions with the same counterparties within very short periods. The quantities involved in the original and reversal transactions were also identical.
According to the order, the entity executed six non-genuine trades in three option contracts:
- GRSM15APR3900.00CE
- HDIL15AUG80.00CEW3
- LNTF15AUG55.00CE
These transactions generated an artificial volume of 2,58,000 units. SEBI noted that the volume created by the entity represented between 17.72% and 20% of the total volume in the respective contracts.
The artificial volume generated through these trades also represented 100% of the entity’s own trading volume in the three contracts.
Trades Reversed Within Seconds or Minutes
The speed and pricing of the reversal transactions played an important role in SEBI’s findings.
In one contract, the trust reportedly reversed its transaction with the same counterparty within only three seconds. The buy and sell prices differed by as much as eleven times.
In another contract, the position was reversed with the same counterparty within approximately five minutes, with the buy and sell rates differing by more than two times. The third contract was also reversed within five minutes, with a significant difference between the transaction prices.
SEBI observed that such accurate matching of price, quantity, timing and counterparty was unlikely to be a mere coincidence. The Adjudicating Officer concluded that the pattern indicated a prior meeting of minds and transactions conducted at predetermined prices.
The regulator found that the trades were not executed in the normal course of trading and lacked a genuine economic rationale. Their effect was to create artificial volume and a misleading appearance of market activity.
The Trust’s Response to the Allegations
The trust stated that it no longer possessed records of the transactions and did not remember the trades. It argued that the transactions had taken place through registered stock-market platforms after payment of the applicable statutory taxes and charges.
It also contended that SEBI and the exchange should have restricted trading in illiquid securities if such activity was considered problematic. The entity suggested that its broker may have deployed the funds for arbitrage and questioned why the proceedings had been initiated several years after the trades.
SEBI rejected these arguments.
The Adjudicating Officer clarified that trading in an illiquid contract was not prohibited by itself. The concern was the specific trading pattern, which SEBI considered non-genuine, manipulative and deceptive.
The order further stated that an exchange merely provides the trading platform. The absence of an automated preventive mechanism does not remove a market participant’s responsibility to ensure that transactions executed through its account are genuine.
Regarding the delay, SEBI explained that its broader investigation was completed in 2018 and identified 14,720 entities allegedly involved in non-genuine trades. Proceedings were subsequently initiated in phases. SEBI had also introduced settlement schemes in 2020, 2022 and 2024 for eligible entities involved in the illiquid stock-options matter.
Although the trust had earlier expressed an intention to settle the matter, it did not complete the settlement process.
Why Artificial Volume Is a Regulatory Concern
Trading volume is an important market signal. Investors may use it to assess liquidity, market participation and interest in a particular security or derivative contract.
Artificial transactions can distort this signal. They may make an illiquid contract appear more active than it genuinely is and can mislead market participants about actual demand or supply.
Reversal transactions with the same counterparty and identical quantities can also be used to create predetermined profits or losses. Such activity may undermine price discovery and the integrity of the securities market, even where trades are executed through the normal exchange mechanism.
SEBI therefore treats manipulative and deceptive trading patterns seriously under the PFUTP Regulations.
The ₹5 Lakh Penalty
After examining the trade data, the entity’s submissions and relevant judicial decisions, SEBI concluded that the violations stood established.
The regulator found the matter appropriate for a monetary penalty under Section 15HA of the SEBI Act, which applies to fraudulent and unfair trade practices in the securities market.
SEBI noted that the available records did not quantify any disproportionate gain or unfair advantage earned by the trust. The precise loss caused to investors could also not be determined.
However, the execution of six non-genuine trades in three contracts was considered sufficient to establish the regulatory violations. SEBI consequently imposed a penalty of ₹5 lakh.
The entity must pay the amount within 45 days of receiving the order. Failure to do so may lead to recovery proceedings, including interest and attachment or sale of movable and immovable assets.
Practical Lessons for Investors and Businesses
The order highlights several important precautions:
- Investors remain responsible for trades executed through their accounts, even when instructions are handled by a broker.
- Contract notes, account statements and trading records should be preserved beyond minimum periods where regulatory proceedings are possible.
- Same-day trades with identical counterparties and quantities require careful scrutiny.
- Unusual price differences in illiquid contracts can attract regulatory attention.
- Paying Securities Transaction Tax or exchange charges does not establish that a transaction is genuine.
- Investors should avoid allowing brokers or representatives unrestricted authority without proper monitoring.
- SEBI notices and settlement opportunities should be reviewed promptly with professional assistance.
- Businesses should document the commercial rationale behind unusual investment or derivative transactions.
The Larger Takeaway
The case demonstrates that regulators evaluate the substance of a transaction rather than merely its technical execution.
A trade can pass through a registered exchange, generate a valid contract note and include payment of statutory charges, yet still violate securities law if its structure and pattern indicate manipulation.
Investors must therefore monitor not only whether transactions are properly recorded but also whether they have a genuine economic purpose. Account holders cannot rely entirely on the trading platform or intermediary to establish regulatory compliance.
Shunyatax Global Insights
Investors, trusts and businesses participating in the securities market should regularly review their trading accounts, broker authorisations and transaction records. Unusual trades involving illiquid securities, repeated counterparties or significant price variations should be examined immediately.
If you or your business is facing challenges involving a SEBI show-cause notice, PFUTP proceedings, suspicious trading allegations, frozen securities accounts or regulatory penalties, Shunyatax Global can provide professional guidance to help you understand the issues, organise the required documentation and proceed with clarity and confidence.
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Disclaimer: This article is based on a publicly issued SEBI adjudication order and is intended solely for general information. It does not constitute legal, investment, tax or regulatory advice. Readers should consult qualified professionals for advice based on their specific circumstances.