Sebi bars 22 brokers for 'tax evasion' trades of Rs 8,100 crore

Securities and Exchange Board of India ( sebi ) on Wednesday barred nearly two dozen trading members from participating in the capital market.A statement released by the regulator said that 22 trading members have been restrained from buying, selling or dealing in the securities markets, directly as well as indirectly, except as a stock broker for existing clients in the cash segment.The trading members are not allowed to take any new customers, the statement added.The banned trading members include NS Broking, Mousumi Deb Roy, Kayan Securities, Lalit Kumar Tulshyan, MKB Securities, Bahubali Forex, Subh Stock Holding and Guiness Securities.The regulator had come across several instances wherein a set of entities were consistently seen incurring trading loss by executing reversal trades in stock options in the derivatives segment.Sebi had observed that loss-making entities were trading mainly in options on individual stocks which were thinly traded.The trades by these loss-making entities, in many cases, contributed to 70% to 100% of total traded volume for the contracts.On several occasions, the quantity of stock options bought and sold were also identical, however, there was a significant difference in the sell value and the buy value of the transactions resulting into significant loss to the loss-making entities. Besides, substantial number of transactions were squared up and a major%age of transactions thereof were trade reversals. For instance, if the stock options were sold first to an entity, they would be bought back in exact quantity from the same entity or vice versaThe activity generated a loss of Rs 1,2730000000 to some clients and a profit of Rs 1,3030000000 to another set of customers. The misuse of stock options displays an unreal picture of market activity to other investors and defeats the price discovery mechanism by repeated execution of pre-decided reversal trades, said the order, signed by Sebi’s whole time member, Rajeev Kumar Agarwal.