The market regulator Sebi revoked Siddhi Vinayak Commodities' licence on Tuesday because it allowed its customers to trade in paired contracts that were prohibited on the National Spot Exchange Ltd, which is no longer in operation.
The noticee's (Siddhi Vinayak Commodities') decision to execute transactions in “paired contracts” without receiving the necessary regulatory clearance casts doubt on the noticee's suitability to serve as a registered securities market intermediary, according to Sebi's ruling.
Anand R. Baiwar, executive director of Sebi, said in the ruling, “I hold that the noticee does not fulfil the 'fit and suitable person' requirement under the regulations and, thus, the continuation of the noticee as a broker would be harmful to the interest of the securities market.
Sebi has requested that the broker provide its current customers 15 days to remove or transfer any securities or monies they have in its possession.
If any customers fail to withdraw or transfer their securities or money within this time frame, the broker will, with the clients' consent, move those clients' monies and securities to another broker within the subsequent 15 days.
The idea of “paired contracts” was launched by NSEL in September 2009, allowing traders to purchase and sell the same commodity via two distinct contracts at two different prices on the exchange platform.
According to the ruling, the 'paired contracts' trading strategy on the NSEL had resulted in a massive loss for investors of Rs 5,500 crore.
Namita Rastogi and Navita Agarwal were each fined Rs 5 lakh by Sebi in two separate rulings for engaging in fraudulent trading in the BSE's illiquid stock options market.
The Securities and Exchange Board of India (Sebi) noticed widespread transaction reversals in the BSE's illiquid stock options market, which caused false activity to be created on the exchange.
From April 2014 to September 2015, it looked into the trading operations of a few companies involved in the BSE sector.