BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO. RA/JP/ 165 /2017]
________________________________________________________________
UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT,
1992 READ WITH RULE 5 OF SEBI (PROCEDURE FOR HOLDING INQUIRY AND
IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995.

In respect of:

Crosseas Capital Services Private Limited (PAN- AACCC5470H)

BACKGROUND

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) upon price
movements in the shares of Sudar Industries Limited (hereinafter referred to as “SIL /
Company”) which formerly known as Sudar Garments Limited, from ` 80.05 to a high
of `117.35 (47% rise), had conducted investigation in the trading/dealing in the shares
of SIL for the period March 11, 2011 (Investigation Period / Day of Listing) for any
possible violation of securities laws. During the course of investigation, prima-facie the
violations of regulation 3 (a) to (d), 4 (1) & 4 (2) (a) and 4 (2) (g) of the SEBI
(Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market)
Regulations, 2003 (hereinafter referred to as ‘PFUTP Regulations’) and clause A (3),
A (4) and A (5) of the Code of Conduct under Schedule II read with regulation 7 of the
SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 (hereinafter referred to as
‘Stock Brokers Regulations’) were observed to have been committed by the
Crosseas Capital Services Private Limited- a Stock Broker / Member of National
Stock Exchange of India Ltd. (NSE) having SEBI Registration No. INB231229536 and
Member of Bombay Stock Exchange Ltd. (BSE) having SEBI Registration No.
INB011229532 (hereinafter referred to as ‘Noticee’).

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 APPOINTMENT OF ADJUDICATING OFFICER

2. SEBI initiated adjudication proceedings and appointed the undersigned as

Adjudicating Officer under section 15 I of the Securities and Exchange Board of India
Act, 1992 (hereinafter referred to as 'SEBI Act') read with rule 3 of the SEBI
(Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules,
1995 (hereinafter referred to as ‘Adjudication Rules’) vide order dated March 30,
2015 to inquire into and adjudge under section 15 HA and 15 HB of the SEBI Act
against the Noticee for the alleged violation of aforesaid provisions of the PFUTP
Regulations and the Stock Brokers Regulations. The order appointing the
undersigned as Adjudicating Officer was communicated to the undersigned vide
communiqué dated April 06, 2015.

SHOW CAUSE NOTICE, REPLY AND HEARING

3. A Show Cause Notice No. E&AO/RA/JP/13383/2015 dated May 12, 2015 (hereinafter
referred to as “SCN”) was served upon the Noticee under rule 4(1) of the
Adjudication Rules to show cause as to why an inquiry should not be held and penalty
be not imposed under sections 15HA and 15HB of the SEBI Act for the alleged
violations regulation 3 (a) to (d), 4 (1) & 4 (2) (a) and 4 (2) (g) of the PFUTP
Regulations and clause A (3), A (4) and A (5) of the Code of Conduct under
Schedule II read with regulation 7 of the Stock Brokers Regulations. After scrutinizing
the investigation report, the allegation that were levelled against the Noticee under
SCN are briefly mentioned below;

a) The Noticee was the top client on gross basis and bought 54.17 lakh shares at an
average price of ` 101.99 and sold them at an average price of ` 102.12 accounting
for 13.41% to the market gross. The client next to the Noticee was observed to have
contributed only 2.03% to market gross. The Open, High, Low & Close price of the
scrip during the period of investigation and post the investigation period, was shown
in table at page 2 of SCN.

b) On day of listing (March 11, 2011), the scrip opened at ` 74.00 at BSE and at ` 80.05
at NSE registering a high of ` 113.10 on both Stock Exchanges and closed at `
117.70 on BSE and ` 117.35 on NSE. Total shares traded were 3,43,12,272 shares
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 at BSE and 4,04,07,612 shares at NSE. Details of top 10 buying and selling stock
brokers on BSE and NSE during the investigation period has been shown at page 3
of SCN.

c) The top 10 stock brokers contributed 46.20% and 46.42% to the gross buy and gross
sell respectively on BSE; and the Noticee was the top stock broker on both gross buy
and gross sell basis contributing 15.76% to the total market volume in gross buy and
15.76% to the total market volume in gross sell. At NSE, top 10 stock brokers
contributed 32.20% and 31.73% to the gross buy and gross sell respectively; and the
Noticee was the top stock broker on both gross buy and gross sell basis contributing
13.41% to the total market volume to the gross buy and sell.

d) The top 10 trading clients contributed 35.92% and 34.76% to the gross buy & gross
sell respectively on BSE; and the Noticee was the top buyer (15.76% of total market
volume) and top seller (15.76% of market volume). Also, top 10 trading clients
contributed 24.94% & 25.01% to the gross buy & gross sell respectively on NSE and
the Noticee was the top buyer(13.41% of total market buy volume) as well as top
seller(13.41% of total market buy volume). The details of top 10 buy clients and sell
clients on BSE and NSE has been shown at page 4-5 (para 6) of the SCN.

e) That the Noticee being a client / proprietary trader as well as the stock broker had
executed huge self trades in its proprietary account (viz. the trades where the seller
and the buyer in a trade remains the same person and no actual beneficial ownership
of shares is changed in such types of transactions). The details of self trades
executed by the Noticee at the BSE and NSE has been shown in para 7 (page 5-6) of
the SCN. Copy of the Investigation Report and a CD / DVD containing order / trade
logs of alleged self trades were provided to the Noticee along with SCN.

f) Investigation while examining the case of self-trades based on criteria (i.e. self-trades
which were exceeding 25,000 shares and executed on more than 100 times by the
entities) had observed that the Noticee entered into repeated huge self-trades at BSE
& NSE during the investigation period (i.e. on March 11, 2011); and by so trading, it
had allegedly created misleading appearance of trading in the securities market

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 without an intention to change the ownership of such securities. It was alleged that
the Noticee while trading in its own / proprietary account was the stock broker /
counter-party stock broker to its self trades and by indulging into such self trades /
adopting such artifice / mechanism which prima facie is fraudulent / unfair in nature, it
had allegedly violated regulations 3 (a), (b), (c), (d) and regulations 4(1), 4(2)(a) and
4(2)(g) of the PFUTP Regulations and also violated clauses A(3), A(4) & A(5) of code
of conduct in Schedule II of regulation 7 of Stock Brokers Regulations.

g) The provisions of law alleged to have been violated by the Noticee are mentioned
below;
FUTP Regulations

3. Prohibition of certain dealings in securities

No person shall directly or indirectly—
(a) buy, sell or otherwise deal in securities in a fraudulent manner;
(b) use or employ, in connection with issue, purchase or sale of any security listed or proposed
to be listed in a recognized stock exchange, any manipulative or deceptive device or
contrivance in contravention of the provisions of the Act or the rules or the regulations made
thereunder;
(c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of
securities which are listed or proposed to be listed on a recognized stock exchange;
(d) engage in any act, practice, course of business which operates or would operate as fraud
or deceit upon any person in connection with any dealing in or issue of securities which are
listed or proposed to be listed on a recognized stock exchange in contravention of the
provisions of the Act or the rules and the regulations made thereunder.

4. Prohibition of manipulative, fraudulent and unfair trade practice

(1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent
or an unfair trade practice in securities.
(2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it
involves fraud and may include all or any of the following, namely:-
(a) indulging in an act which creates false or misleading appearance of trading in the
securities market;
(g) entering into a transaction in securities without intention of performing it or without
intention of change of ownership of such security;

Schedule II under Stock Brokers Regulations

A (3) Manipulation : A stock-broker shall not indulge in manipulative, fraudulent or deceptive

transactions or schemes or spread rumours with a view to distorting market equilibrium or
making personal gains.
(4) Malpractices: A stock-broker shall not create false market either singly or in concert with
others or indulge in any act detrimental to the investors interest or which leads to interference
with the fair and smooth functioning of the market. A stockbroker shall not involve himself in
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 excessive speculative business in the market beyond reasonable levels not commensurate with his
financial soundness.
(5) Compliance with statutory requirements: A stock-broker shall abide by all the provisions of
the Act and the rules, regulations issued by the Government, the Board and the stock exchange
from time to time as may be applicable to him.

h)It was stated in the SCN that the aforesaid alleged violations, if established, would
make the Noticee liable for monetary penalty under section 15 HA and 15 HB of the
SEBI Act.

4. In respect to the SCN, the Noticee through letter dated May 26, 2015 requested for
inspection of 20 documents as shown therein and sought 15 days time to file reply in
the matter after receiving documents under inspection. An opportunity of inspection of
documents was provided to the Noticee vide communique dated June 02, 2015
requiring the Noticee to complete the inspection of documents on or before June 15,
2015. In the said communique for inspection, it was clearly stated that the details /
information / documents etc. indicated at point no. 2, 8-15 of Noticee’s letter May 26,
2015 have already been provided along with SCN as Annexure I, II and in a CD
containing entire order/trade logs of self-trades / other details etc. and therefore,
Noticee was called upon to submit its reply, if any, on or before June 30, 2015.

5. The Noticee vide letter dated June 03, 2015 and June 08, 2015 again asked the
documents / inspection and disputed the receipt of documents along with SCN as
stated in aforesaid communique dated June 02, 2015. The Noticee vide letter dated
June 22, 2015 informed undersigned that no intimation was received from SEBI for
providing of inspection. Also, vide another letters dated June 22, 2015 and dated July
15, 2015 addressed to SEBI, it had submitted list of documents for inspection.
Thereafter, SEBI vide e-mail dated August 10, 2015 intimated to Noticee the date for
inspection of documents.

6. An opportunity of inspection of documents was availed by the Noticee on September

08, 2015 and the minutes of inspection is available on records. Inspection minutes
revealed that inspection of only those documents as relied in the SCN, were provided
to the Noticee. Thereafter, the Noticee without filing reply towards the SCN, vide letter
dated September 09, 2015 stated that the trade logs provided to it does not contain

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 the NEAT CTCL IDs (in case of NSE) and IML IDs (in case of BSE) to ascertain
whether the self-trades happened at the member level or terminal level. Again vide
letter dated September 18, 2015 and September 30, 2015, it had raised the same
issue of documents / inspection and asked the copy of minutes of inspection
conducted in the matter.

7. As no reply was filed by the Noticee despite lapse of sufficient time, vide a
communique / hearing notice dated October 01, 2015, it was stated –

i. The inspection of documents as relied in the SCN has been availed by it and copy
of inspection minutes is also enclosed

ii. Copies of each documents / order & trade logs as relied in the SCN have already
been provided along with SCN and other documents as requested by it are unwanted
/ not relevant towards for defending the allegation of self trades.

iii. Inspection of documents as available on records were provided to it and other

documents which were not available on records in the present case, cannot be
provided.

iv. Copy of internal office noting as available with undersigned (viz. material placed
before Whole Time Member to decide for inquiry and appointing adjudicating officer),
though the same was not so important to defend the allegation of self-trades, but,
considering the principle of natural justice at larger extent, the same is also enclosed.

v. The CD as forwarded along with SCN, has been derived from the Stock Exchanges
records and contains necessary details of its alleged self-trades including buy / sell
location ID and the data as shown in the CD are sufficient to demonstrate its role in
self-trades.

8. Vide said notice / communique dated October 01, 2015, the Noticee was again asked
to submit its reply on or before October 14, 2015 and advised it to appear before the
undersigned for hearing on October 21, 2015. It was clearly indicated therein that if no

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 reply / appearance is made, then, the matter would be decided further on the basis of
evidence available on record in terms of sub-rule (7) of rule (4) of the Adjudication
Rules.

9. In respect of aforesaid, the Noticee neither submitted reply towards the SCN nor
appeared for hearing on scheduled date. However, vide letter dated October 09,
2015, it had again requested for complete inspection of documents in the matter and
sought adjournment of hearing. Considering the principle of natural justice at larger
extent and in the interest of justice, SEBI was asked to provide another opportunity of
inspection of documents to the Noticee and accordingly, second opportunity of
inspection on November 04, 2015 was given to the Noticee. The minutes of inspection
of documents dated November 04, 2015 is available on records. From the inspection
minutes, it is seen that SEBI has given the details of documents that were provided
during the course of inspection, the details of those documents inspection of which
was sought, but, were not available on the record of SIL case and the details of
documents inspection / copies were not provided as the same were treated as
confidential by SEBI.

10. As the inspection of documents was complete and the relied upon document were
forwarded to the Noticee, therefore, vide final notice of hearing dated November 17,
2015, the Noticee was again asked to submit its reply on or before November 24,
2015 and to appear before the undersigned for hearing on November 30, 2015.

11. However, surprisingly, the Noticee had neither submitted reply towards the SCN nor
appeared for hearing, but, vide letter dated November 17, 2015 again raised same
issue i.e. inspection is not complete as all documents not provided etc. and tried to
show relevance of documents sought. Vide letter dated November 26, 2015, it had
also intimated that it had filed a consent / settlement application on November 19,
2015 before SEBI for settlement of action in respect of SCN.

12. Upon verification as to whether the Noticee had filed any settlement application or not,
SEBI on December 16, 2015 informed the undersigned that the settlement application
is received and due to some deficiency, the same is pending for registration.

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13. The Noticee through letter dated December 11, 2015 again raised the same issue that
inspection of document is not complete and therefore, it cannot submit reply towards
the SCN or appear for hearing. Vide said letter, it had again asked for documents
sought under inspection. In the meantime, the Noticee vide an e-mail dated
December 28, 2015 informed that it had filed an appeal before the Hon’ble Securities
Appellate Tribunal (Hon’ble SAT) seeking inspection of additional documents.
Lateron, the undersigned was informed by SEBI that the Hon’ble SAT had disposed of
the said appeal of the Noticee vide order dated March 31, 2016 with following
observation:
“1. In view of the statement made by SEBI in Para 22 of its affidavit in reply filed in Appeal
No. 529 of 2015 on March 3,2016 to the effect that the issue relating to the inspection of
documents sought for could be agitated before the adjudicating officers (A.O for short) of
Securities and Exchange Board of India (SEBI for short) and that the A.O after hearing the
appellants shall pass a detailed order on such submissions, counsel for the appellants seek
permission to withdraw both the appeal with liberty to agitate the issue relating to inspection
of documents sought for by the appellants before the adjudicating officer.

2.Accordingly, while permitting the appellants to withdraw these appeal, we permit the A.O.
to pass a composite order on the issue relating to relevancy of documents inspection of which
is sought by the appellants and also on merits.”

14. As the Hon’ble SAT directed to pass a composite order on the issue relating to
relevancy of documents inspection of which is sought by the Noticee and also on
merit of case, therefore, 3rd notice of hearing was served to it through digitally signed
e-mail dated May 31, 2016 asking the Noticee to appear for hearing on June 07, 2016
and to file its reply towards the SCN on or before June 06, 2016. It was clearly
indicated in the said notice that if no reply / appearance is made, then, the matter
would be decided further on the basis of evidence available on record in terms of sub-
rule (7) of rule (4) of the Adjudication Rules.

15. However, very shockingly, the Noticee had neither filed reply towards SCN nor
appeared for hearing (despite disposal of its appeal by the Hon’ble SAT) and vide an
e-mail / letter dated June 03, 2016 had inter-alia stated that no order can be passed in
the instant adjudication proceeding until disposal of its consent / settlement
application pending with SEBI. Again, adjournment of hearing was sought and
requested for data proceeding, asked for the data of self-trades that had occurred
during 2011-2016. Here, it is relevant to mention that all the necessary order / trade
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 logs relating to self-trades of the Noticee, has already been furnished to it, but, it
continued to adopt such delay dallying tactics in the instant proceedings. Here, it is
relevant to mention that not only Noticee’s trade logs, but, the complete trade logs in
SIL scrip for the period March 11, 2011 to March 13 of 2011 have been provided to
Noticee during the course of inspection of documents on November 04, 2015. The
Noticee vide said letter had stated as under;

i. That NSE and BSE had conducted multiple inspection of its software during the
period 2010-2015 and no adverse observation were made about violation of any
securities laws.

ii. The algorithmic software used was duly approved by NSE and BSE.

iii. That Secondary market Advisory Committee (SMAC) discussed the possibilities of
self-trades in algo trading.

iv. Criteria of 25,000 self trades shows that SEBI does not always holds self trades in
violations.

v. SEBI had not taken actions against other stock brokers and also raised baseless
question / issue of jurisdiction of WTM of SEBI in appointing Adjudicating officer.

16. The Noticee without heeding to the disposal of its appeal by the Hon’ble SAT and
without filing any specific reply towards the SCN or without appearing for aforesaid
hearings, vide another letter dated June 17, 2016 continued in protracting the instant
proceedings on unwanted issues and again requested for certain documents (viz.
SEBI file notings dealing with the representation made by some Hon’ble Members of
Parliament in respect to self-trades).

17. In the meantime, on July 07, 2016 SEBI informed about filing of Settlement
Application bearing No. 3062/2016 in respect of Noticee and undersigned was
requested to continue the proceedings except passing of the final order in the matter
which may be kept in abeyance till the completion of the settlement proceedings.

18. Pending settlement application, the Noticee continued in sending the letters (i.e. July
05, 2016 and August 02, 2016) insisting further inspection of documents despite the

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 fact that it had withdrawn appeal before the Hon’ble SAT on the same issue of
inspection. It had also vide letter dated August 22, 2016 again asked for certain
documents (viz. SEBI file notings dealing with the representation made by some
Hon’ble Members of Parliament in respect to self-trades) and remained adamant in
not replying towards the allegations under SCN / not appearing for hearing in the
matter. The act and conduct of the Noticee in delaying the proceedings, can be seen
from its said letter dated August 22, 2016 whereby it had again sought for 15 working
days time from the date all the documents sought under the inspection are received
by it, to file its reply.

19. Further, the Noticee vide letter dated February 20, 2017 relied upon a judgment
dated February 10, 2017 of Hon’ble SAT remanding / setting aside certain cases of
self-trades for passing fresh order on merit after taking policy view etc. Vide said
letter, the Noticee also stated –

a. Self trade issue was considered by the SMAC in January 2014. SMAC concurred
with the view that Algo trading may lead to self trades and that unless these self
trades were found to be manipulative, SEBI should allow self trades.
b. Globally, also the experience was that HFT algo trading resulted in increased
incidence of self trades, and that to counter that issue, most exchanges introduced
the self trade prevention system into their matching engines.
c. Notably, now the Indian Exchanges have also put the self trade prevention system
into their matching engine.
d. Prior to the check being put into place, self trades were extremely widespread in
the Indian markets. Data on self trades revealed that 30%-40% of all exchange
members had self trade activity on any given day. Thus, by extrapolation, all
members would have had self trade activity at some time or the other.
e. There have not been any specific guidelines ever issued by either the exchanges
or SEBI on "self trades". Even the specific Algo guidelines made no mention of it.
f. In 4-5 years of Algo trading, the surveillance department of neither of the
exchanges ever raised the issue
g. PFUTP Regulations prohibits ONLY such trades which are not intended to effect
transfer of beneficial ownership, but, intended to operate only as a device to inflate,
depress or cause fluctuations in the price of such security for wrongful gain or
avoidance of loss.
h. Regulation 4(2)(g) of PFUTP Regulation states- "entering into a transaction in
securities without intention of performing it or without intention of change of ownership
of such security.

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 i. There is no allegation on us to have executed any self trades with an intention to
inflate, depress, or fluctuate the price of any security. It is our humble submission that
"fraud" and "manipulation" are co-existent with "intention". Thus, the litmus test for
self trade activity being fraudulent lies in the "intent" and NOT the "event".

j. We are attaching a brief note on the working of the algorithm that explains the
situations that may have led to self trades. As is apparent from the explanation, there
was no attempt to do intentionally self trade, or cause market price of any security to
either inflate, depress, or fluctuate. In fact, the speed at which the algorithm traded,
as well the small quantity of shares in any given instance of self trade, would also
render it incapable of influencing market behavior.

20. Thereafter, on April 21, 2017 SEBI informed that the settlement application has been
withdrawn by the Noticee and adjudication matter may be proceeded further.

21. Upon such withdrawal of settlement application by the Noticee, a final opportunity of
hearing was provided to the Noticee vide notice of hearing dated April 24, 2017 and it
was asked to file reply if any, on or before May 02, 2017 and was also given 2nd last
opportunity of hearing on May 03, 2017. In the said notice, it was clearly indicated that
the matter is pending since long and no adjournment would be granted beyond the
aforesaid scheduled time lines. It was also clearly indicated that if no appearance /
reply is made by it by aforesaid dates, then, the matter would be decided further on
the basis of material available on record in terms of sub-rule (7) of rule (4) of the
Adjudication Rules.

22. However, the Noticee again failed to appear for the aforesaid scheduled hearing and
also did not file any reply (except aforesaid letters). In response to said notice, the
Noticee had vide letter dated April 28, 2017 while raising the same issue of further
inspection of documents, also submitted as-

i. The SAT Order dated February 10, 2017 in Appeal No. 104 of 2015 may be
considered for the self-trades wherein SEBI has stated that they are still
reconsidering/formulating their view/Enforcement Action Policy on Self Trade matters.
Further, in an e-mail dated January 25, 2017 addressed to Association of National
Exchanges Member of India ('ANMI), SEBI has stated that matter of Self Trade is still
pending under examination. From the above, it is obvious that the view of SEBI on
the basis of which the present proceedings were initiated, is being re-considered/

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 reviewed. Therefore, it will be highly improper and illegal to proceed in the matters till
SEBI has taken a final decision in respect of how and when to take adverse view on
self trades. We request you to kindly provide us a copy of the documented policy and
the date on which such decision was taken.

ii. We also seek order log of all our trades on BSE as well as NSE for the relevant
period (investigation period) in the scrip and in all other scrips traded by us in the
same period (investigation period). If we have this data, then only we can
demonstrate that same trading pattern essentially of arbitrage only has been our
business model. Infact arbitrage (simultaneous buying and selling of securities) is our
only business and the same trading pattern was followed / will be seen in other scrips
as well. In light of Hon'ble Supreme Court's judgment dated January 10, 2017 in the
matter of SEBI v. PRICE WATERHOUSE, (in Civil Appeal No. 60001-60002 and
60003-60004 of 2012), inspection of all the material on the record of SEBI may be
provided.

23. Considering the principle of natural justice at larger extent, the Noticee was provided
another opportunity of hearing on June 13, 2017 vide notice dated May 22, 2017 and
also asked it to file reply/submissions, if any, by June 05, 2017. Vide said notice, it
was also informed that the extant policy of SEBI on self-trades in respect of on going
cases, does not restrict continuance of present proceedings in any manner and the
case needs to be considered on merit taking into account the manipulation / intent /
volume etc.

24. Again, the Noticee failed to appear for the scheduled hearing and vide letter dated
June 01, 2017 inter alia submitted that-

i. SEBI has provided us copy of the approved Enforcement Action Policy which has to
be applied to deal with ongoing cases involving allegation of self-trade (Copy of the
Enforcement Action Policy bearing no. EFD/DRA-3/ON/332/2017 dated May 16, 2017
is enclosed and marked as 'Annexure A'). It may kindly be noted that paragraph 2 of
the policy states that, "intention is a sine qua non for establishing manipulation in
case of self trades and accidental self- trades are not covered under the said
regulations. It may also be noted that SEBI has proceeded against us merely on the
basis of occurrence of self trades. Your attention is drawn to your letter dated August
22, 2016 wherein it was stated that the "SCN alleges your indulgence into
manipulative trades (self trades) and therefore primarily you are required to submit
whether the alleged trades has been executed by you or not." Therefore, it is evident
that your goodself was only concerned with occurrence of self trades.

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 ii. It is also seen that Investigation Reports are also indicating merely occurrence of
self trades and no intention has been imputed and no dimension of manipulation has
been brought out. In respect of our matters, self trades in question were purely
accidental, as a result of ultra high frequency intended arbitrage trading
(simultaneous buying and selling of securities) which was done through Approved
Algo Trading Software.

iii. Your kind attention is drawn to our submissions on facts in the matter of
Servalakshmi Papers Limited (which apply to current matters as well) taken into
consideration by the Adjudicating Officer. (Adjudication Order No. EAD-
2/DSR/RG/07/2013 dated November 27,2013),

iv. Your attention is also drawn to affidavit dated October 9, 2015 filed by Bombay
Stock Exchange before Hon'ble SAT. BSE clearly admits that Algo trading results in
accidental self trades.

25. I am of the view that the principle of natural justice has been followed at larger extent
in the matter. From the aforesaid several communications, it is clear that the Noticee
had delayed the proceeding and failed to appear for hearing despite so many
opportunities (especially even after withdrawal of its appeal before Hon’ble SAT on
the issue of inspection of documents). At this juncture, I am also inclined to refer a
judgment of the Hon’ble SAT in the matter of Sanjay Kumar Tayal & Ors. Vs. SEBI (in
appeal No. 68/2013) decided on February 11, 2014 wherein it was inter-alia held that-

“…., appellants have neither filed reply to show cause notices issued to them nor availed
opportunity of personal hearing offered to them in the adjudication proceedings and,
therefore, appellants are presumed to have admitted charges levelled against them in the
show cause notices”.

26. I cannot ignore that the Noticee (being an intermediary) had deliberately remained
adamant on unwanted issues in this proceedings and adopted all the means to
protract the instant adjudication proceedings as observed in pre paras (including filing
of settlement application and withdrawing of same after a considerable time).

27. After taking into account the allegations, the submissions made under aforesaid
letters of Noticee, other evidences / material available on records and taking into
account the instruction of the Hon’ble SAT to undersigned, I hereby, proceed to pass

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 a composite order on the issue relating to relevancy of documents inspection of which
is sought by the Noticee and also on merits.

CONSIDERATION OF ISSUES AND FINDINGS

28. The issues that arise for consideration in the present case are :

a) Whether several documents inspection of which is sought by the Noticee are

relevant for making reply towards the allegations levelled or / and whether the
relied upon documents or the documents as available on records with SEBI, have
been provided to the Noticee during the course of inspection / under instant
adjudication proceedings?

b) Whether the Noticee had indulged into self-trades with an intention to create
misleading appearance of trading without change in beneficial ownership of such
securities and if yes, then whether such indulgence by the Noticee, is in violation
of regulation 3 (a) to (d), 4 (1) & 4 (2) (a) and 4 (2) (g) of the PFUTP Regulations
and clause A (3), A (4) and A (5) of the Code of Conduct under Schedule II read
with regulation 7 of the Stock Brokers Regulations?

c) If yes, then, does the violations on the part of the Noticee attract monetary penalty
under sections 15 HA and 15HB of the SEBI Act?

d) If yes, then, what would be the monetary penalty that can be imposed upon the
Noticee taking into consideration the factors mentioned in section 15J of the SEBI
Act read with rule 5 (2) of the Adjudication Rules?

ISSUE No. 1

Whether several documents inspection of which is sought by the Noticee are

relevant for making reply towards the allegation levelled or / and whether the
relied upon documents or the documents as available on records with SEBI,
have been provided to the Noticee during the course of inspection / under
instant adjudication proceedings

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29. The Hon’ble SAT vide order dated March 31, 2016 (while the appeal was withdrawn
by the Noticee) had instructed the Adjudicating Officer / undersigned to pass a
composite order on the issue of relevancy of documents inspection of which is sought
by the appellant and also on merits of case.

30. Before going to examine the relevancy of documents sought under inspection, I am
inclined to mention that only documents that were relied upon along with SCN are
namely- (the proceeding of order appointing the undersigned as Adjudicating Officer
communicated vide communiqué dated April 06, 2015 (Annexure I), copy of
Investigation Report along with a CD/DVD containing order/ trade logs of Noticee’s
self-trades (Annexure II). No other documents were relied in the SCN and needless to
say that the adjudication proceeding can be decided based on the said documents
only. Certainly, Annexure II (Investigation Report and a CD/DVD containing order/
trade logs of Noticee’s self-trades) is relevant /crucial document towards the
allegation in this case.

31. As stated in pre paras that first opportunity of inspection of documents was provided
to the Noticee on September 08, 2015 and second opportunity of inspection of those
documents as available on records in the case of SIL, was availed by the Noticee on
November 04, 2015. Copy of said inspection minutes are available on records and
same were provided to the Noticee.

32. From the said minutes of inspection dated November 04, 2015, it is observed that
total 29 documents were sought under inspection and out of that inspection / copies of
3 documents have been provided to the Noticee. The documents which were asked
and copies thereof have been provided under inspection are –

(i) copy of list of self trades which occurred in the scrip of SIL by different stock brokers
(whether from the same terminal or otherwise) on the date of listing March 11, 2011.

(ii) complete trade logs of the SIL scrip between March 11, 2011 to March 13, 2011 (including
details of NEAT CTCL terminal at NSE and the IML IDs at BSE)

(iii) copy of Investigation Report.

Page 15 of 45
33. I am of the view that in order to make suitable defence / reply towards the SCN, the
aforesaid documents were only the relevant documents, and in fact these have been
provided to the Noticee under inspection / along with SCN.

34. Further, inspection minutes clearly indicated that 21 documents inspection of which
was sought by the Noticee, were not available on records in the case of SIL. I am of
the view that since these 21 documents which were not available on records in the
case of SIL, therefore, question of inspection / copies thereof does not arise at all. In
respect of 5 documents of which inspection / copies were not provided because the
same were treated as confidential in nature by SEBI.

35. I have perused the list of documents inspection of which was sought by the Noticee
and also letter dated November 17, 2015 of the Noticee quoting relevance of these
information / documents sought. After examining the said list of documents and
analyzing the relevance quoted by the Noticee, I am of the view that same were not
so crucial information/documents to respond the allegation. The details of information
/ documents along with relevance thereof as claimed by the Noticee and my
observations / analysis to that effect, are as under;

S. Information Sought Relevance of the My Observations /

No Information sought Analysis
.
1. Dates on which the Since SEBI had conducted The details of inspection
inspection of algorithmic the inspection of the conducted by SEBI, if any,
trading software of the software of the Noticee, it regarding Noticee’s
Noticee was done by SEBI, is reasonable to believe software for said period
NSE and BSE in the period that SEBI should have this during 2010 to 2015 may
2010-15; information in its records not be necessarily available
in case records of SIL, and
in fact, it is so stated by the
concerned Department /
SEBI under inspection
minutes dated November
04, 2015.

It was merely an inference

of the Noticee that SEBI
should have this
information.

Further, how the “Dates” as

sought, is material to
Page 16 of 45
 respond the allegation of
self trades, is not at all clear
or moreover not relevant in
the given case.

2. Date on which the findings This information is As after deliberation, the Ld.
of the inspection were put important to determine WTM of SEBI had approved
up for the whether the WTM had the actions and appointed
information/knowledge of adequate information to the undersigned as
the Whole Time Member reach the prima facie Adjudicating Officer.
who had approved initiation conclusion that
of adjudication proceedings; adjudication was Needless to say that by
3. Date on which the warranted in this matter. virtue of investigation, action
algorithmic trading software approval and appointment
of the Noticee was of undersigned, it is clear
approved by BSE and NSE; that adjudication is
4. Date on which the Whole warranted in this case. Also,
Time Member who had the “Dates” so sought, are
approved initiation of not material to respond the
adjudication proceedings allegation.
was made aware that the
algorithmic trading software I cannot ignore that Noticee
of the Noticee was had relied an Affidavit of
approved by BSE and NSE; BSE dated October 09,
2015 wherein at para 15 the
details of its algo trading
approval is indicated.
Moreover, the Noticee itself
should be aware of “Date”
on which its algorhythmic
software as approved by the
Exchanges(s).
5. Copy of list of self trades This information is I am of the view that the
which occurred in the scrip relevant since other issue of “same
of SIL from different Adjudicating Officers have terminal/different terminal”
terminals of Crosseas considered whether the needs to be decided on
Capital Services Pvt. Ltd.; self trades occurred from merit of each cases in light
6. Copy of list of self trades the same terminal or of so many parameters; and
which occurred in the scrip different terminals. therefore, Noticee cannot
of SIL and THE same Without this information, question the “fairness” in the
terminal of Crosseas this case cannot be matter.
Capital Services Pvt. Ltd.; decided fairly.
7. Copy of list of self trades Secondly, I do not
which occurred in the scrip understand what stops the
of SIL from different CTCLs Noticee to make reply
of Crosseas Capital towards the SCN on each
Services Pvt. Ltd.; point (including plea of
8. Copy of list of self trades terminal) in its support
which occurred in the scrip instead of raising unwanted
of SIL from THE same inferences.
CTCL of Crosseas Capital
Services Pvt. Ltd.;
9. Copy of agenda and Since the SMAC is a Copy of SMAC
minutes of all Meetings of committee formulated by recommendation is not
Page 17 of 45
 the Secondary Market SEBI, it is reasonable to available in case records of
Advisory Committee believe that SEBI should SIL, and in fact, it is so
(“SMAC”) held between have this information in its stated by the concerned
January 1, 2014 – March records and it is requested department / SEBI under
31, 2014 dealing with self that the same may be inspection minutes dated
trades; provided to us forthwith. November 04, 2015.

Moreover, SMAC
recommendations does not
override the PFUTP
Regulation or decision of
SEBI to initiate actions for
breach of any securities
laws.

Merely, drawing an
inference that SEBI should
have this information, is not
pertinent at all.

10. Date on which the Whole This information is In this regards, my

Time Member who had important to determine observations at point 2-4
approved initiation of whether the WTM had above may be seen.
adjudication proceedings adequate information to
was made aware of the reach the prima facie
agenda and minutes of conclusion that
SMAC dealing with self adjudication was
trades; warranted in this matter.
11. Copy of correspondence This information is For all the information /
with exchanges on the relevant to understand documents at point 11-20,
issue of self trade whether the exchanges inspection minutes dated
prevention by exchanges had been asked to November 04, 2015 clearly
for the last one year; implement the self trade indicated the non-availability
prevention mechanism at of these information/dates in
their level. the case file of SIL.
12. Copy of correspondence Since the self trade
indicating action initiated prevention mechanism
against the exchange for was introduced belatedly
failing to prevent self trades by the Exchanges, it is Point No. 11 & 12 –
or for approving algorithms important to know the The reasons given by the
that resulted in self trades; action initiated against the Noticee behind such
Exchanges for their failure information / documents are
to prevent self trades not material in light of
earlier. aforesaid observations
13. Copy of SEBI This is a SEBI guideline made by me at point 1-10.
circular/regulation/guideline/ used to determine whether
any other document SCN is to be issued and it Further, taking or not taking
providing the criteria that is reasonable to believe of any action against the
self trades exceeding that SEBI should have this Exchange, is not material
25,000 shares and information in its records here to reply the charges
executed on more than 100 and it is requested that the levelled in the SCN.
times by the entities are in same may be provided to
violation of SEBI (PFUTP) us forthwith. Point No. 13 & 14 –
Regulations, 2003 As stated previously that the
Page 18 of 45
 (Reference – paragraph 9,
page 6 of SEBI Show
Cause Notice);
14. Date on which the Whole
Time Member who had
approved initiation of
adjudication proceedings
was made aware of the
criteria referred to in point
13 above;
15. Copy of the minutes of the
SEBI Surveillance Meeting
during which the Exchanges
were advised to study the
feasibility of implementing a
mechanism at exchange
level to prevent accidental
self trades by algo trading.
(Reference – paragraph 3
of the reply filed by BSE in
Appeal no. 104 of 2015
before the Securities
Appellate Tribunal.)
16. Date on which the Whole
Time Member who had
approved initiation of
adjudication proceedings
was made aware that the
Exchanges had been
advised to study the
feasibility of implementing a
mechanism at exchange
level to prevent accidental
self trades by algo trading;
17. Dates on which SEBI’s
Surveillance system
generated any alerts of self
trades in this scrip.
18. Copies of communication
between Investigation
Department, Integrated
Surveillance Department
and Market Regulation
Department on the issue of
self trades during the period
between 1st January, 2011
to 1st September, 2015.
19. Copies of communication
between SEBI and RBI on
the issue of self trades on
the exchanges, including in
currency
This information is
important to determine
whether the WTM had
adequate information to
reach the prima facie
conclusion that
adjudication was
warranted in this matter.
This is a SEBI meeting
and it is reasonable to
believe that SEBI should
have its minutes in its
records and it is requested
that the same may be
provided to us forthwith.
This information is
important to determine
whether the WTM had
adequate information to
reach the prima facie
conclusion that
adjudication was
warranted in this matter.
It is important to know
when the surveillance
mechanism generated self
trades in this scrip to
prepare our reply.
Since the communication
is within the departments
of SEBI, it is reasonable to
believe that SEBI should
have this information in its
records and it is requested
that the same may be
provided to us forthwith.
Since the communication
is between RBI and SEBI,
it is reasonable to believe
that SEBI should have this
information in its records
Page 19 of 45
present case has been
approved for actions and
criteria for holding self-
trades as manipulative,
needs to be examined case
to case basis taking into
account various factors.
As observed above that
adjudication is warranted in
this case and the “Dates”
so sought, are not material
to respond the allegation.
Point No. 15 to 18 – “Copy”
and ‘Dates’ and the reasons
cited by the Noticee, are not
material at all to reply the
allegation in the present
case of self trades.
Point No. 19 to 20
Communication between
RBI and SEBI in respect of
self trades and the reasons
thereof given by the
Noticee, is not material at all
while defending its case.
Non availability of such file
notings has been clearly
mentioned under inspection
minutes
Taking into account the
aforesaid points at point 1-
20, I am of the view that the
“dates” and ‘copy’ etc. as
sought by the Noticee, is not
crucial in making reply to
the SCN. Moreover the
same are not available on
records of SIL case as
stated by the SEBI.
 and it is requested that the
same may be provided to
us forthwith.
20. Copy of file notings of SEBI Since the file notings
dealing with the issue of self sought are those of SEBI
trades on the stock itself, it is reasonable to
exchanges. believe that SEBI should
have this information in its
records and it is requested
that the same may be
provided to us forthwith.
21. Complete order log of the We need this information Complete order trade logs
scrip of SIL between March to ascertain whether the has been provided during
11, 2011 and March 13, exact quantities resulted in the course of inspection on
2011 self trades or there have November 04, 2015 as
been some stray self observed at pre paras of
trades out of the total this order.
quantity. This information
has been provided by Also, list of self trades which
SEBI in other cases occurred in the scrip of SIL
involving self trades as by different stock brokers
well. (whether from the same
terminal or otherwise) on
the date of listing March 11,
2011) was also provided
during inspection of
documents.

In fact, the representative of

Noticee had clearly written
at the said inspection
minutes that 3 documents
have been provided.

It would be appropriate to
mention that along with
SCN, the relied upon self
trades logs were also
provide to the Noticee under
a CD.

From the observation made

at point 1-21, it is clear that
the “dates” and “copies” of
information / documents as
sought by the Noticee were
either provided to it or were
not available on records
with SEBI in SIL case File.

Also as observed, these

information / documents are
not crucial / important and
not of such nature that
Page 20 of 45
 without which suitable
defence cannot be made by
the Noticee. In my opinion,
on the basis of Annexure /
CD provided either along
with SCN or under
inspection of documents,
the defence / reply could
have been made by the
Noticee. However, it was
not so opted by the Noticee
and stood adamant on
inspection issue throughout
in the instant proceedings.

S. Information Sought Relevance of the

No. Information sought
1. Date on which findings of This information is During the inspection, these
the investigation were put important to determine documents were not
up before the Whole Time whether the WTM had provided as the same were
Member for his decision to adequate information to treated as confidential in
appoint the Adjudicating reach the prima facie nature by SEBI.
Officer. conclusion that
2. Copy of the materials adjudication was A copy of office noting as
placed before the Whole warranted in this matter. available with undersigned
Time Member to decide that (relating to material placed
there were sufficient before WTM to decide for
grounds to inquire into the inquiry and appointing
alleged violations; adjudicating officer) was
3. Copy of reasons recorded provided to the Noticee vide
by the Board, Chairman, notice of hearing dated
Member or the Executive October 01, 2015, though
Director that there are the same was not material
reasonable grounds to for the Noticee to defend
investigate the affairs of the the allegation of self-trades.
Noticee in the scrip of SIL;
4. Copy of authorization for As stated above that by
investigation; virtue of investigation,
5. Copy of file notings dealing action approval and
with this matter; appointment of
undersigned, it is clear that
adjudication is warranted in
this case.

Therefore, the relevance /

reason behind such
documents as shown by the
Noticee, are not at all
justified.

Also, these “documents /

dates”, are not of such
nature that without which
suitable defence cannot be
Page 21 of 45
 made by the Noticee.

36. Besides, I cannot ignore that so many opportunities of filing reply towards the SCN
and to appear for hearing, have been granted to the Noticee and it had consistently
failed to file / appear. It goes without saying that once a SCN is issued to a person
and all the relied upon documents are provided to him, then, at least reply on the
facts / figures leading to allegation in a case, can be either admitted or negated by
that person. However, the Noticee throughout in this proceedings remained adamant
and failed to file specific reply towards facts/figure of allegations and failed to appear
for hearing despite so many opportunities given to it as observed in pre para of this
order.

37. Therefore, in my opinion all the relevant / available and permissible documents have
already been provided to the Noticee during the course of inspection / along with SCN
and same were sufficient to respond the allegation. No other documents are left for
any further inspection in the matter.

ISSSUE NO. 2

Whether the Noticee had indulged into self-trades with an intention to create
misleading appearance of trading without change in beneficial ownership of
such securities and if yes, then whether such indulgence by the Noticee, is in
violation of regulation 3 (a) to (d), 4 (1) & 4 (2) (a) and 4 (2) (g) of the PFUTP
Regulations and clause A (3), A (4) and A (5) of the Code of Conduct under
Schedule II read with regulation 7 of the Stock Brokers Regulations?

38. I have carefully perused the allegations, submissions of the Noticee made by it under
aforesaid letters. The sole nature of allegation against the Noticee is that it had
indulged into manipulative trades and created misleading appearance of trading in the
securities market without an intention to change the ownership of such securities. The
facts / details of the trading / trading data as alleged in the SCN, are not in dispute by
the Noticee as no specific reply towards the content of allegation is made by the
Noticee, except certain contentions made under several letters referred in above
paras of this order.

Page 22 of 45
39. Before going into merit of case, it is relevant to depict about the "self trades". Self
trades are those kinds of trades where the seller and the buyer in a particular trade
remains the same person and no actual beneficial ownership of such transactions is
changed. In respect of self-trading, the Hon’ble SAT in the matter of Shankar Sharma
Vs. SEBI (Appeal No. 14 of 2009 decided on October 28, 2009), observed as follows-

“ ….. …. It is thus clear that the appellant was on both sides. He was the buyer as well as the
seller. The buy and sell orders were put into the system at almost the same time. Such trades
have been executed in large quantities while dealing with the shares of different companies.
We have no hesitation to hold that these trades were fictitious as there was no change in the
beneficial ownership of the shares traded and it was the appellant on both sides of the trades.
How can a person buy from himself and sell to himself. Such trades are only meant to create
artificial volumes and they disturb the market equilibrium”. Therefore, taking in to
consideration the above position of law, I am of the firm opinion that the Noticee had
indulged in the said fictitious trades which are per se illegal and only meant to artificially
create the volumes in the scrip".

40. Also, the similar findings were made by the Hon'ble SAT in the case of Krupa Soni &
Ors. v/s SEBI (Appeal No. 32/2013) decided on January 24, 2014 holding that-

“On perusal of pleadings and hearing the oral submissions, we note that the self trades are
fictitious in nature as there is no transfer of actual beneficial ownership of share and because
the buyer and seller are the same person. Such trades are injurious to a healthy market and
result in the creation of artificial volumes in the scrip. This in turn gives a totally wrong
signal to the members of the public who may invest in the hope of making some gains but
ultimately land up with losses. The argument advanced by the learned counsel for the
Appellant Shri J.J. Bhatt, who appears with Ms. Rinku Valanju that such self trades were
executed through several brokers, in no way mitigates the charge of violation of the PFUTP
Regulations. This Tribunal has taken a consistent view that a few instances of self trades in
themselves would not, ipso facto, amount to an objectionable trades. However, in the case in
hand a number of shares have been dealt with by executing self trades, albeit, through several
brokers. Details in this regard have been supplied by the learned AO in paragraphs 17 and
18 of the impugned order. Both the Appellants have executed such self trades through various
brokers at least on many occasions during the period in question”.

41. It is important to mention that series of cases on self-trades were upheld by the
Hon’ble SAT. It is pointed out that in aforesaid case of Krupa Soni & Ors., the total
executed self-trades by the appellant were to the extent of 1,82,942 shares which
constituted 7.60% of Krupa Soni Group’s trades and 3.26% of the total market

Page 23 of 45
 volume in the scrip. In other words, the self-trades which are around 3% of the total
market volumes in a particular scrip, has been considered as substantial having
impact upon volumes in the scrip. Here, I am also inclined to refer to a judgment of
the Hon'ble SAT in case of Angel Broking Pvt. Ltd. V/s SEBI (Appeal No. 46/2014)
decided on October 01, 2014 whereby penalty was upheld for execution of only 4 self
trades involving 9866 shares executed by the appellant in just 2 days.

42. Whereas in the instant case, it is observed from the records that the Noticee had
indulged into self trades which was 2.42% (quantity 8,31,677) of the total market
volume of SIL at BSE and 1.55% (quantity 6,28,461) of the total market volume of SIL
at NSE. The details of such substantial self-trades is being discussed in later part of
this order.

43. At this stage, it is appropriate to deal with plea taken by the Noticee regarding recent
SEBI Policy in respect of self-trades and the Noticee stated that "intention is a sine
qua non for establishing manipulation in case of self-trades and accidental self- trades
are not covered under the said regulations. I have noted that the SEBI policy on self-
trades also emphasizes upon ‘intent’ and while assessing the manipulative intent, the
volume transacted may also be considered in addition to other factors.

44. It is necessary to mention here that for the allegation of fraudulent activities, it is
settled law by the Hon’ble SAT and well as Supreme Court of India that more the
serious allegation involving the fraudulent / manipulative activities is there, higher /
stricter the degree of proof is required to prove the allegations and same cannot be
concluded merely on the preponderance of probabilities. It is important here to
mention that to find out the “intention” behind indulgence into any manipulative / unfair
/ fraudulent trades/activities, the Hon’be SAT in case of Ketan Parekh Vs. SEBI
(Appeal No. 2 of 2004) decided on July 14, 2006 had categorically held that- in order
to find out whether a transaction has been executed with the intention to manipulate
the market or defeat its mechanism, will depend upon the intention of the parties
which could be inferred from the attending circumstances of the cases, because direct
evidence in such cases may not be available.

Page 24 of 45
45. Now, after taking into account various judgments of the Hon’ble SAT and the current
Policy of SEBI on self-trades, it is clear that incidental self-trades or the mere
execution of self-trades, are not per - se manipulative/fraudulent; and to hold a person
liable for the charge of manipulative self-trades creating misleading appearance of
trading in securities market, two important criteria viz. (a) the manipulative intention
needs to be examined; and (b) to prove such manipulative intention, the attending
circumstances of the case or the modus operandi (i.e. frequency, timing, number of
self-trades / volumes / percentage of self-trades towards total market or own trading
percentage / frequency of trades / proprietary trading or cliental trading etc.) needs to
be looked into. In other words, the manipulative intent can only be derived from the
circumstance / modus operandi used by the person in case specific.

46. Now, to deal with the issue of “intent” and the attending manipulative circumstances of
the case, the trading pattern adopted by the Noticee while executing self-trades in the
scrip of SIL, is being examined hereunder.

47. It is observed from the unrebutted records that on day of listing of SIL shares (i.e.
March 11, 2011), the scrip opened at ` 74.00 at BSE and at ` 80.05 at NSE
registering a high of ` 113.10 on both stock exchanges and closed at ` 117.70 on
BSE and ` 117.35 on NSE. Total shares traded were 3,43,12,272 shares on BSE and
4,04,07,612 shares on NSE. It is also noted from the available records that the
Noticee was the top client on gross basis (viz. bought as well as sold 54,08,918 lakh
shares at BSE and bought as well as sold 54,17,271 lakh shares at NSE) at an
average price of `101.99 and sold them at an average price of `102.12. Details of top
10 buying and selling clients (including the Noticee who is a stock broker / client) on
BSE and NSE on March 11, 2011 is tabulated below:

BSE

Buy Broker Name Gross % of Sell Broker Name Gross % of

Buy Traded Vol Sell Traded Vol
Crosseas Capital Crosseas Capital
5408918 15.76 5408919 15.76
Services Pvt.Ltd. Services Pvt.Ltd.
Adroit Financial Services
1996849 5.82 ASE Capital Markets Ltd. 2003416 5.84
Pvt. Ltd.
ASE Capital Markets Ltd. 1435403 4.18 Adroit Financial Services 1996849 5.82

Page 25 of 45
 Pvt. Ltd.
Eureka Stock & Share Eureka Stock & Share
1282864 3.74 1284395 3.74
Broking Services Ltd. Broking Services Ltd.
N Mercantile Pvt.
Excel
1271630 3.71 Angel Broking Ltd. 1059121 3.09
Ltd.
Amrapali Capital & Amrapali Capital &
998820 2.91 1000952 2.92
Finance Services Ltd. Finance Services Ltd.
Smart Equity Brokers Pvt.
Angel Broking Ltd. 945580 2.76 922655 2.69
Ltd.
N
Smart Equity Brokers Prudent Broking Services
922655 2.69 851358 2.48
Pvt. Ltd. Pvt. Ltd.
Prudent Broking Marwadi Shares &
885800 2.58 715878 2.09
Services Pvt. Ltd. Finance Ltd.
Marwadi Shares &
702868 2.05 Excel Mercantile Pvt. Ltd. 682630 1.99
Finance Ltd.
Top 10 Buy Brokers 15851387 46.20 Top 10 Sell Brokers 15926173 46.42
Remaining Brokers 18490885 53.80 Remaining Brokers 18386099 53.58
Total Traded Volume 34312272 100.00 Total Traded Volume 34312272 100.00

NSE

% of Traded Gross % of Traded

Buy Broker Name Gross Buy Sell Broker Name
Vol Sell Vol
Crosseas Capital Crosseas Capital
5417271 13.41 5417271 13.41
Services Pvt. Ltd. Services Pvt. Ltd.
Magnum Equity Broking
Religare Securities Ltd. 1045115 2.59 915106 2.27
Limited
Excel Mercantile Private Excel Mercantile Private
1003998 2.49 911998 2.26
Limited Limited
Magnum Equity Broking
915106 2.27 Religare Securities Ltd. 861556 2.13
Limited
Monarch Project & Monarch Project &
810116 2.01 843032 2.09
Finmarkets Limited Finmarkets Limited
Composite Securities Ltd. 805932 2.00 Kotak Securities Ltd. 807625 2.00

Kotak Securities Ltd. 782852 1.94 Composite Securities Ltd. 805932 2.00
Adroit Financial Services Adroit Financial Services
759741 1.88 759841 1.88
Private Limited Private Limited
Genuine Stock Brokers Angel Broking Private
745412 1.85 751813 1.86
Pvt Ltd Limited
Vijeta Broking India Marwadi Shares And
727009 1.80 745921 1.85
Private Limited Finance Limited
Top 10 Buy Brokers 13012552 32.20 Top 10 Sell Brokers 12820095 31.73

Remaining Brokers 27395060 67.80 Remaining Brokers 27587517 68.27

Total Traded Volume 40407612 100 Total Traded Volume 40407612 100

48. It is observed from the records that top 10 stock brokers (including the Noticee) had
contributed 46.20% and 46.42% to the gross buy and gross sell respectively on BSE;
and the Noticee was the top stock broker on the basis of gross buy and gross sell.
The Noticee had contributed 15.76% of the total market volume of SIL shares in gross
buy and 15.76% to the total market volume in gross sell at BSE. Likewise, at NSE, top
Page 26 of 45
 10 stock brokers contributed 32.20% and 31.73% to the gross buy and gross sell
respectively; and the Noticee was the top stock broker on the basis of both gross buy
and gross sell. The Noticee had contributed 13.41% of the total market volume in
gross buy and 13.41% to the total market volume in gross sell at NSE.

49. It is noted that the Noticee being a stock broker as well as client, had executed in its
proprietary account the huge self-trades at the BSE and NSE, details of which are
shown in tables below;

BSE
Broker on buy & Traded No of Qty as Qty as +LTP Net
Entity Name Sell Side Qty Self % to % to of self LTP
Trades Market client trades of
Vol Total (`) self
Vol trade
s (`)

Adroit Financial Adroit Financial

Services Private Services Private 4381 27 0.01 1.58 0.20 -0.25
Limited Limited
A K G Securities And Adroit Financial 24945 47 0.07 1.66 1.30 0.70
Consultancy Ltd. Services Pvt Limited
Group Total 29326 74 0.08 1.50 0.45
Crosseas Capital Crosseas Capital -
831677 15627 2.42 15.37 192.20
Services Pvt Ltd Services Pvt Ltd 16.50

Eureka Stock & Share Eureka Stock &

Share Broking 13326 19 0.04 1.06 0.50 0.30
Broking Services Ltd
Services Ltd

H P Share Shoppe Smart Equity Brokers 5710 13* 0..01 0.61 0.30 -0.10
Pvt Ltd
Genuine Stock Brokers Genuine Stock
3373 18 0.01 0.76 0.35 -0.30
Pvt Ltd Brokers Pvt Ltd
Bp Fintrade Private Bp Equities Private
4 4 0 0.01 0 0
Limited Limited

NSE

Net
Qty as
Qty as +LTP LTP
No of % to
Broker on Buy & Traded % to of self of
Entity Name Self client
Sell Side Qty Market trades( self
Trades Total
Vol `) trade
Vol
s(`)

Page 27 of 45
 Adroit Financial Services Adroit Financial
Services Private 456 21 0.00 0.00 0.45 0.25
Pvt Ltd
Limited

A K G Securities And Adroit Financial

Services Private 178 65 0.00 0.00 0.75 0
Consultancy Ltd.
Limited

Group Total 634 86 0.00 0.00 1.20 0.20

Crosseas Capital Crosseas Capital

628461 11079 1.55 6.02 182.15 -2.55
Services Pvt Ltd Services Pvt Ltd

Genuine Stock Brokers Genuine Stock

6623 39 0.016 0.44 0.65 0.2
Pvt Ltd Brokers Pvt Ltd

Maniput Investments Magnum Equity

3999 19 0.01 0.49 0.10 -0.5
Pvt. Ltd* Broking Limited

Bp Fintrade Private Bp Equities Private

912 55 0.002 0.00 0.05 -0.15
Limited^ Limited

50. From the above, it is clearly seen that on the day of listing (viz. March 11, 2011) the
Noticee’s contribution was 15.76% at BSE and 13.41% at NSE towards the total
market which infact, is very substantial as compared to any other stock broker / client
on that day. I cannot ignore that out of said 15.76% and 13.41% at BSE and NSE
respectively, the Noticee’s contribution towards the total market volume for such self-
trades in the scrip of SIL was 2.42% (8,31,677 shares) at BSE and 1.55% (6,28,461
shares) at NSE. Also, out of total trading done by the Noticee, its own percentage
towards such self-trading is 15.37% and 6.2 % at BSE and NSE respectively. Further,
the total trades under which self trading took place was very substantial i.e. 15,627 at
BSE and 11,079 at NSE on the day of listing.

51. As it is seen from the above para that 2.42% at BSE and 1.55% at NSE was the
contribution of the Noticee towards total market volume in the SIL by way of self trade
(around 4% at both market / Exchanges), therefore, taking into account the aforesaid
judgment in Krupa Soni case (wherein around 3% of the total market self trades were
considered as substantial creating misleading appearance of trading), the present
case bears similarities to said case in terms of total market volumes of self trades.
Moreover, I cannot ignore the fact that such substantial volume to the total market
was a result of just one day only. Dealing into such large self-trades, certainly cannot
be by virtue of any coincidence / incidence, but, the same are put into system by the
Page 28 of 45
 Noticee with pre determination to get these matched with its respective orders leading
no change in ownership of shares. I cannot ignore that incidental trades cannot take
place at such voluminous scale as compared to total market volume and its own total
trading of the Noticee (15.37%).

52. In order to further find out the manipulative intent / modus operandi of the Noticee
while dealing in the scrip of SIL, I have carefully gone through the trade logs of
Notocee’s self trades as available on records.

53. I have observed from the trade / order logs that such self trades were done by the
Noticee at almost all the times on the day of listing (viz. trading time 09:00 a.m. to
03:30 p.m.) and many of them were executed from the same terminal / location IDs or
selected location IDs only. It is also noted that in many self-trades, the order for
respective buy and sell of shares were placed at same time (zero second difference)
or within time difference of just 1-2 seconds only or less than a minute time difference.
It is also noted that in almost cases, such trades resulted on same time towards it
corresponding buy/sell orders. I am of the view that such indulgence at almost same
time that too from same location continuously for entire trading day on March 11,
2011, cannot be a matter of coincidence/incidence and cannot be in the ordinary
course of business strategy, but, the same are put into system with pre determination
to get these matched with its respective buy/sell orders, causing no change in
ownership of shares and to create misleading appearance of trading in the share of
SIL on the day of listing itself. Examples of such trading from the same terminal /
location IDs of the Noticee with no time difference or time difference of just 1-2
seconds or within 1 minutes, is given in table below;

Page 29 of 45
Buy Location ID Sell Location ID Buy Order Time Sell Order Time Trade Time Buy Location ID Sell Location ID Buy Order Time Sell Order Time Trade Time

400001001002000 400001001002000 09:15:58.0000000 09:15:58.0000000 09:15:58.0000000 400001001002000 400001001002000 11:41:42.0000000 11:41:43.0000000 11:41:43.0000000

400001001002000 400001001002000 09:16:27.0000000 09:16:28.0000000 09:16:28.0000000 400001001002000 400001001002000 11:42:23.0000000 11:42:23.0000000 11:42:23.0000000

400001001002000 400001001002000 09:16:42.0000000 09:16:41.0000000 09:16:42.0000000 400001001002000 400001001002000 11:42:45.0000000 11:42:46.0000000 11:42:46.0000000

400001001002000 400001001002000 09:16:43.0000000 09:16:52.0000000 09:16:52.0000000 400001001002000 400001001002000 11:43:06.0000000 11:43:10.0000000 11:43:11.0000000

400001001002000 400001001002000 09:16:57.0000000 09:16:57.0000000 09:16:57.0000000 400001001002000 400001001002000 11:45:22.0000000 11:45:20.0000000 11:45:22.0000000

400001001002000 400001001002000 09:16:59.0000000 09:17:00.0000000 09:17:00.0000000 400001001002000 400001001002000 11:45:39.0000000 11:45:39.0000000 11:45:39.0000000

400001001002000 400001001002000 09:17:07.0000000 09:17:06.0000000 09:17:07.0000000 400001001002000 400001001002000 11:45:53.0000000 11:45:52.0000000 11:45:53.0000000

400001001002000 400001001002000 09:17:21.0000000 09:17:23.0000000 09:17:23.0000000 400001001002000 400001001002000 11:46:09.0000000 11:46:09.0000000 11:46:09.0000000

400001001002000 400001001002000 09:17:34.0000000 09:17:25.0000000 09:17:34.0000000 400001001002000 400001001002000 11:46:10.0000000 11:46:05.0000000 11:46:10.0000000

400001001002000 400001001002000 09:17:34.0000000 09:17:25.0000000 09:17:34.0000000 400001001002000 400001001002000 11:46:10.0000000 11:46:05.0000000 11:46:10.0000000

400001001002000 400001001002000 09:17:34.0000000 09:17:34.0000000 09:17:34.0000000 400001001002000 400001001002000 11:48:51.0000000 11:48:48.0000000 11:48:51.0000000

400001001002000 400001001002000 09:18:36.0000000 09:18:40.0000000 09:18:40.0000000 400001001002000 400001001002000 11:48:51.0000000 11:49:13.0000000 11:49:13.0000000

400001001002000 400001001002000 09:19:21.0000000 09:19:21.0000000 09:19:21.0000000 400001001002000 400001001002000 11:50:19.0000000 11:50:21.0000000 11:50:21.0000000

400001001002000 400001001002000 09:22:56.0000000 09:23:01.0000000 09:23:03.0000000 400001001002000 400001001002000 11:52:55.0000000 11:52:58.0000000 11:52:59.0000000

400001001002000 400001001002000 09:23:51.0000000 09:23:14.0000000 09:24:07.0000000 400001001002000 400001001002000 11:53:18.0000000 11:53:18.0000000 11:53:19.0000000

400001001002000 400001001002000 09:26:22.0000000 09:26:20.0000000 09:26:23.0000000 400001001002000 400001001002000 11:53:55.0000000 11:53:20.0000000 11:53:57.0000000

400001001002000 400001001002000 09:44:56.0000000 09:44:56.0000000 09:44:56.0000000 400001001002000 400001001002000 11:57:24.0000000 11:57:46.0000000 11:57:46.0000000

400001001002000 400001001002000 09:44:56.0000000 09:44:56.0000000 09:44:56.0000000 400001001002000 400001001002000 11:59:55.0000000 12:00:05.0000000 12:00:06.0000000

400001001002000 400001001002000 09:57:20.0000000 09:57:21.0000000 09:57:21.0000000 400001001002000 400001001002000 12:02:17.0000000 12:02:16.0000000 12:02:17.0000000

400001001002000 400001001002000 10:01:01.0000000 10:01:01.0000000 10:01:01.0000000 400001001002000 400001001002000 12:03:07.0000000 12:03:06.0000000 12:03:07.0000000

400001001002000 400001001002000 10:18:26.0000000 10:18:26.0000000 10:18:26.0000000 400001001002000 400001001002000 12:08:10.0000000 12:08:12.0000000 12:08:12.0000000

400001001002000 400001001002000 10:18:28.0000000 10:18:28.0000000 10:18:28.0000000 400001001002000 400001001002000 12:11:06.0000000 12:11:06.0000000 12:11:06.0000000

400001001002000 400001001002000 10:18:46.0000000 10:18:44.0000000 10:18:46.0000000 400001001002000 400001001002000 12:18:21.0000000 12:18:10.0000000 12:18:21.0000000

400001001002000 400001001002000 10:22:06.0000000 10:21:36.0000000 10:22:06.0000000 400001001002000 400001001002000 12:18:21.0000000 12:18:16.0000000 12:18:21.0000000

400001001002000 400001001002000 10:22:26.0000000 10:22:33.0000000 10:22:35.0000000 400001001002000 400001001002000 12:27:54.0000000 12:27:25.0000000 12:27:57.0000000

400001001002000 400001001002000 10:30:12.0000000 10:30:13.0000000 10:30:13.0000000 400001001002000 400001001002000 12:29:47.0000000 12:29:55.0000000 12:29:56.0000000

400001001002000 400001001002000 11:03:12.0000000 11:03:11.0000000 11:03:12.0000000 400001001002000 400001001002000 12:29:47.0000000 12:29:07.0000000 12:29:48.0000000

400001001002000 400001001002000 11:06:33.0000000 11:06:35.0000000 11:06:37.0000000 400001001002000 400001001002000 12:31:30.0000000 12:32:00.0000000 12:32:02.0000000

400001001002000 400001001002000 11:17:25.0000000 11:17:24.0000000 11:17:26.0000000 400001001002000 400001001002000 12:34:47.0000000 12:34:54.0000000 12:34:55.0000000

400001001002000 400001001002000 11:19:19.0000000 11:19:25.0000000 11:19:25.0000000 400001001002000 400001001002000 12:44:01.0000000 12:44:00.0000000 12:44:01.0000000

400001001002000 400001001002000 11:19:55.0000000 11:19:53.0000000 11:19:55.0000000 400001001002000 400001001002000 13:01:06.0000000 12:59:51.0000000 13:01:06.0000000

400001001002000 400001001002000 11:20:09.0000000 11:20:19.0000000 11:20:19.0000000 400001001002000 400001001002000 13:08:58.0000000 13:08:57.0000000 13:08:58.0000000

400001001002000 400001001002000 11:20:38.0000000 11:21:12.0000000 11:21:12.0000000 400001001002000 400001001002000 13:08:58.0000000 13:08:57.0000000 13:08:58.0000000

400001001002000 400001001002000 11:21:13.0000000 11:21:14.0000000 11:21:14.0000000 400001001002000 400001001002000 13:15:31.0000000 13:15:30.0000000 13:15:31.0000000

400001001002000 400001001002000 11:21:21.0000000 11:21:28.0000000 11:21:28.0000000 400001001002000 400001001002000 13:20:05.0000000 13:20:05.0000000 13:20:05.0000000

400001001002000 400001001002000 11:25:13.0000000 11:25:17.0000000 11:25:17.0000000 400001001002000 400001001002000 13:24:41.0000000 13:24:42.0000000 13:24:42.0000000

400001001002000 400001001002000 11:38:45.0000000 11:38:46.0000000 11:38:46.0000000 400001001002000 400001001002000 13:26:17.0000000 13:26:25.0000000 13:26:25.0000000

400001001002000 400001001002000 11:38:49.0000000 11:38:40.0000000 11:38:49.0000000 400001001002000 400001001002000 13:28:03.0000000 13:27:06.0000000 13:28:05.0000000

400001001002000 400001001002000 11:38:49.0000000 11:38:40.0000000 11:38:49.0000000 400001001002000 400001001002000 13:28:03.0000000 13:27:48.0000000 13:28:05.0000000

400001001002000 400001001002000 11:39:20.0000000 11:39:19.0000000 11:39:20.0000000 400001001002000 400001001002000 13:29:34.0000000 13:28:09.0000000 13:29:34.0000000

400001001002000 400001001002000 11:39:45.0000000 11:39:46.0000000 11:39:46.0000000 400001001002000 400001001002000 13:30:58.0000000 13:30:59.0000000 13:30:59.0000000

400001001002000 400001001002000 11:39:45.0000000 11:39:46.0000000 11:39:46.0000000 400001001002000 400001001002000 13:31:00.0000000 13:31:00.0000000 13:31:00.0000000

400001001002000 400001001002000 11:39:48.0000000 11:39:47.0000000 11:39:48.0000000 400001001002000 400001001002000 13:31:20.0000000 13:31:20.0000000 13:31:20.0000000

400001001002000 400001001002000 11:40:51.0000000 11:40:52.0000000 11:40:52.0000000

400001001002000 400001001002000 11:40:57.0000000 11:40:57.0000000 11:40:57.0000000

400001001002000 400001001002000 11:41:41.0000000 11:41:39.0000000 11:41:41.0000000

Page 30 of 45
Buy Location ID Sell Location ID Buy Order Time Sell Order Time Trade Time Buy Location ID Sell Location ID Buy Order Time Sell Order Time Trade Time

400001001002000 400001001002000 13:32:12.0000000 13:32:28.0000000 13:32:29.0000000 400001001002000 400001001002000 14:15:56.0000000 14:15:56.0000000 14:15:56.0000000

400001001002000 400001001002000 13:32:46.0000000 13:32:49.0000000 13:32:49.0000000 400001001002000 400001001002000 14:15:56.0000000 14:15:56.0000000 14:15:56.0000000

400001001002000 400001001002000 13:32:52.0000000 13:32:52.0000000 13:32:52.0000000 400001001002000 400001001002000 14:20:09.0000000 14:20:08.0000000 14:20:09.0000000

400001001002000 400001001002000 13:32:53.0000000 13:32:53.0000000 13:32:53.0000000 400001001002000 400001001002000 14:20:09.0000000 14:20:08.0000000 14:20:09.0000000

400001001002000 400001001002000 13:33:13.0000000 13:33:13.0000000 13:33:13.0000000 400001001002000 400001001002000 14:31:22.0000000 14:32:03.0000000 14:32:04.0000000

400001001002000 400001001002000 13:37:12.0000000 13:37:07.0000000 13:37:12.0000000 400001001002000 400001001002000 14:33:20.0000000 14:33:19.0000000 14:33:21.0000000

400001001002000 400001001002000 13:42:30.0000000 13:42:51.0000000 13:42:52.0000000 400001001002000 400001001002000 14:59:37.0000000 14:59:39.0000000 14:59:39.0000000

400001001002000 400001001002000 13:47:02.0000000 13:46:54.0000000 13:47:04.0000000 400001001002000 400001001002000 14:59:47.0000000 14:59:41.0000000 14:59:48.0000000

400001001002000 400001001002000 13:48:09.0000000 13:48:09.0000000 13:48:09.0000000 400001001002000 400001001002000 15:01:52.0000000 15:01:54.0000000 15:01:54.0000000

400001001002000 400001001002000 13:48:18.0000000 13:48:19.0000000 13:48:19.0000000 400001001002000 400001001002000 15:05:28.0000000 15:05:27.0000000 15:05:28.0000000

400001001002000 400001001002000 13:48:27.0000000 13:48:27.0000000 13:48:27.0000000 400001001002000 400001001002000 15:05:28.0000000 15:05:27.0000000 15:05:28.0000000

400001001002000 400001001002000 13:48:30.0000000 13:48:30.0000000 13:48:30.0000000 400001001002000 400001001002000 15:05:30.0000000 15:05:30.0000000 15:05:30.0000000

400001001002000 400001001002000 13:49:05.0000000 13:49:10.0000000 13:49:10.0000000 400001001002000 400001001002000 15:05:30.0000000 15:05:30.0000000 15:05:30.0000000

400001001002000 400001001002000 13:50:38.0000000 13:50:39.0000000 13:50:39.0000000 400001001002000 400001001002000 15:05:50.0000000 15:05:44.0000000 15:05:50.0000000

400001001002000 400001001002000 13:51:03.0000000 13:51:03.0000000 13:51:03.0000000 400001001002000 400001001002000 15:06:27.0000000 15:06:26.0000000 15:06:27.0000000

400001001002000 400001001002000 13:51:06.0000000 13:50:57.0000000 13:51:07.0000000 400001001002000 400001001002000 15:06:27.0000000 15:06:26.0000000 15:06:27.0000000

400001001002000 400001001002000 13:53:02.0000000 13:54:40.0000000 13:54:41.0000000 400001001002000 400001001002000 15:07:17.0000000 15:07:04.0000000 15:07:17.0000000

400001001002000 400001001002000 13:54:45.0000000 13:54:38.0000000 13:54:45.0000000 400001001002000 400001001002000 15:07:24.0000000 15:07:21.0000000 15:07:24.0000000

400001001002000 400001001002000 13:55:16.0000000 13:55:22.0000000 13:55:22.0000000 400001001002000 400001001002000 15:11:14.0000000 15:11:20.0000000 15:11:20.0000000

400001001002000 400001001002000 13:55:17.0000000 13:55:22.0000000 13:55:22.0000000 400001001002000 400001001002000 15:11:20.0000000 15:11:20.0000000 15:11:20.0000000

400001001002000 400001001002000 13:55:23.0000000 13:55:17.0000000 13:55:23.0000000 400001001002000 400001001002000 15:15:21.0000000 15:15:22.0000000 15:15:22.0000000

400001001002000 400001001002000 13:55:26.0000000 13:55:24.0000000 13:55:26.0000000 400001001002000 400001001002000 15:15:37.0000000 15:15:38.0000000 15:15:38.0000000

400001001002000 400001001002000 14:03:16.0000000 14:03:17.0000000 14:03:17.0000000 400001001002000 400001001002000 15:15:53.0000000 15:15:40.0000000 15:15:53.0000000

400001001002000 400001001002000 14:03:40.0000000 14:03:40.0000000 14:03:40.0000000 400001001002000 400001001002000 15:16:59.0000000 15:17:00.0000000 15:17:00.0000000

400001001002000 400001001002000 14:03:57.0000000 14:03:54.0000000 14:03:58.0000000 400001001002000 400001001002000 15:16:59.0000000 15:17:00.0000000 15:17:00.0000000

400001001002000 400001001002000 14:03:57.0000000 14:03:54.0000000 14:03:58.0000000 400001001002000 400001001002000 15:19:10.0000000 15:19:14.0000000 15:19:15.0000000

400001001002000 400001001002000 14:04:20.0000000 14:04:18.0000000 14:04:20.0000000 400001001002000 400001001002000 15:19:10.0000000 15:19:14.0000000 15:19:15.0000000

400001001002000 400001001002000 14:05:44.0000000 14:06:05.0000000 14:06:05.0000000 400001001002000 400001001002000 15:19:34.0000000 15:19:36.0000000 15:19:36.0000000

400001001002000 400001001002000 14:06:13.0000000 14:06:02.0000000 14:06:15.0000000 400001001002000 400001001002000 15:20:37.0000000 15:20:39.0000000 15:20:39.0000000

400001001002000 400001001002000 14:14:10.0000000 14:13:51.0000000 14:14:10.0000000 400001001002000 400001001002000 15:23:42.0000000 15:23:47.0000000 15:23:47.0000000

400001001002000 400001001002000 14:15:54.0000000 14:15:54.0000000 14:15:54.0000000 400001001002000 400001001002000 15:23:46.0000000 15:23:47.0000000 15:23:47.0000000

Page 31 of 45
Buy Location ID Sell Location ID Buy Order Time Sell Order Time Trade Time Buy Location ID Sell Location ID Buy Order Time Sell Order Time Trade Time

400001001010000 400001001010000 09:16:25.0000000 09:16:22.0000000 09:16:25.0000000 400001001010000 400001001010000 11:45:58.0000000 11:45:57.0000000 11:45:58.0000000

400001001010000 400001001010000 09:16:56.0000000 09:16:33.0000000 09:16:56.0000000 400001001010000 400001001010000 11:45:58.0000000 11:45:57.0000000 11:45:58.0000000

400001001010000 400001001010000 09:17:12.0000000 09:17:15.0000000 09:17:15.0000000 400001001010000 400001001010000 11:46:08.0000000 11:46:08.0000000 11:46:08.0000000

400001001010000 400001001010000 09:17:55.0000000 09:17:55.0000000 09:17:55.0000000 400001001010000 400001001010000 11:46:09.0000000 11:46:09.0000000 11:46:09.0000000

400001001010000 400001001010000 09:17:55.0000000 09:17:55.0000000 09:17:55.0000000 400001001010000 400001001010000 11:46:09.0000000 11:46:09.0000000 11:46:09.0000000

400001001010000 400001001010000 09:17:55.0000000 09:17:55.0000000 09:17:55.0000000 400001001010000 400001001010000 11:48:35.0000000 11:48:35.0000000 11:48:36.0000000

400001001010000 400001001010000 09:18:10.0000000 09:17:40.0000000 09:18:10.0000000 400001001010000 400001001010000 11:48:54.0000000 11:49:12.0000000 11:49:12.0000000

400001001010000 400001001010000 09:18:10.0000000 09:17:40.0000000 09:18:10.0000000 400001001010000 400001001010000 12:03:09.0000000 12:03:09.0000000 12:03:10.0000000

400001001010000 400001001010000 09:18:10.0000000 09:17:40.0000000 09:18:10.0000000 400001001010000 400001001010000 12:05:02.0000000 12:09:19.0000000 12:09:19.0000000

400001001010000 400001001010000 09:19:50.0000000 09:19:49.0000000 09:19:50.0000000 400001001010000 400001001010000 12:09:38.0000000 12:09:41.0000000 12:09:41.0000000

400001001010000 400001001010000 09:38:35.0000000 09:38:36.0000000 09:38:36.0000000 400001001010000 400001001010000 12:31:38.0000000 12:31:39.0000000 12:31:39.0000000

400001001010000 400001001010000 09:44:56.0000000 09:45:02.0000000 09:45:02.0000000 400001001010000 400001001010000 12:37:02.0000000 12:38:30.0000000 12:38:32.0000000

400001001010000 400001001010000 11:18:16.0000000 11:18:06.0000000 11:18:16.0000000 400001001010000 400001001010000 12:43:59.0000000 12:43:59.0000000 12:43:59.0000000

400001001010000 400001001010000 11:21:46.0000000 11:20:58.0000000 11:21:49.0000000 400001001010000 400001001010000 12:44:17.0000000 12:44:03.0000000 12:44:18.0000000

400001001010000 400001001010000 11:38:48.0000000 11:38:46.0000000 11:38:48.0000000 400001001010000 400001001010000 13:08:09.0000000 13:08:10.0000000 13:08:10.0000000

400001001010000 400001001010000 11:43:08.0000000 11:43:06.0000000 11:43:08.0000000 400001001010000 400001001010000 13:17:02.0000000 13:16:52.0000000 13:17:04.0000000

400001001010000 400001001010000 11:43:39.0000000 11:43:59.0000000 11:43:59.0000000 400001001010000 400001001010000 13:20:06.0000000 13:20:05.0000000 13:20:06.0000000

400001001010000 400001001010000 11:43:56.0000000 11:43:57.0000000 11:43:57.0000000 400001001010000 400001001010000 13:30:58.0000000 13:31:00.0000000 13:31:00.0000000

400001001010000 400001001010000 11:43:56.0000000 11:43:57.0000000 11:43:57.0000000 400001001010000 400001001010000 13:32:44.0000000 13:32:49.0000000 13:32:49.0000000

400001001010000 400001001010000 11:43:56.0000000 11:43:59.0000000 11:43:59.0000000 400001001010000 400001001010000 13:32:54.0000000 13:32:54.0000000 13:32:54.0000000

400001001010000 400001001010000 11:44:01.0000000 11:44:00.0000000 11:44:02.0000000 400001001010000 400001001010000 13:33:16.0000000 13:33:13.0000000 13:33:16.0000000

400001001010000 400001001010000 11:44:01.0000000 11:44:00.0000000 11:44:02.0000000 400001001010000 400001001010000 13:46:22.0000000 13:46:22.0000000 13:46:22.0000000

400001001010000 400001001010000 11:44:01.0000000 11:44:00.0000000 11:44:02.0000000 400001001010000 400001001010000 13:51:06.0000000 13:51:07.0000000 13:51:07.0000000

400001001010000 400001001010000 11:44:01.0000000 11:44:00.0000000 11:44:02.0000000 400001001010000 400001001010000 13:51:45.0000000 13:51:44.0000000 13:51:45.0000000

400001001010000 400001001010000 11:44:10.0000000 11:44:08.0000000 11:44:10.0000000 400001001010000 400001001010000 13:55:28.0000000 13:55:28.0000000 13:55:28.0000000

400001001010000 400001001010000 11:44:58.0000000 11:45:00.0000000 11:45:00.0000000 400001001010000 400001001010000 13:58:28.0000000 13:58:32.0000000 13:58:32.0000000

400001001010000 400001001010000 11:45:12.0000000 11:45:13.0000000 11:45:13.0000000 400001001010000 400001001010000 13:59:17.0000000 13:59:30.0000000 13:59:32.0000000

400001001010000 400001001010000 11:45:12.0000000 11:45:13.0000000 11:45:13.0000000 400001001010000 400001001010000 13:59:17.0000000 13:59:31.0000000 13:59:32.0000000

400001001010000 400001001010000 11:45:12.0000000 11:45:13.0000000 11:45:13.0000000 400001001010000 400001001010000 14:03:24.0000000 14:03:40.0000000 14:03:40.0000000

400001001010000 400001001010000 11:45:12.0000000 11:45:13.0000000 11:45:13.0000000 400001001010000 400001001010000 14:06:13.0000000 14:06:02.0000000 14:06:15.0000000

400001001010000 400001001010000 11:45:12.0000000 11:45:13.0000000 11:45:13.0000000 400001001010000 400001001010000 14:49:24.0000000 14:49:24.0000000 14:49:24.0000000

400001001010000 400001001010000 11:45:24.0000000 11:45:23.0000000 11:45:24.0000000 400001001010000 400001001010000 15:14:18.0000000 15:14:17.0000000 15:14:18.0000000

400001001010000 400001001010000 11:45:24.0000000 11:45:23.0000000 11:45:24.0000000 400001001010000 400001001010000 15:15:13.0000000 15:15:15.0000000 15:15:15.0000000

400001001010000 400001001010000 11:45:34.0000000 11:45:35.0000000 11:45:35.0000000 400001001010000 400001001010000 15:15:13.0000000 15:15:15.0000000 15:15:15.0000000

400001001010000 400001001010000 11:45:37.0000000 11:45:37.0000000 11:45:37.0000000 400001001010000 400001001010000 15:15:21.0000000 15:15:22.0000000 15:15:22.0000000

400001001010000 400001001010000 11:45:37.0000000 11:45:37.0000000 11:45:37.0000000 400001001010000 400001001010000 15:15:21.0000000 15:15:22.0000000 15:15:22.0000000

400001001010000 400001001010000 11:45:53.0000000 11:45:52.0000000 11:45:53.0000000 400001001010000 400001001010000 15:15:26.0000000 15:15:24.0000000 15:15:27.0000000

400001001010000 400001001010000 11:45:56.0000000 11:45:56.0000000 11:45:56.0000000 400001001010000 400001001010000 15:15:36.0000000 15:15:36.0000000 15:15:36.0000000

400001001010000 400001001010000 11:45:56.0000000 11:45:56.0000000 11:45:56.0000000

400001001010000 400001001010000 11:45:56.0000000 11:45:56.0000000 11:45:56.0000000

400001001010000 400001001010000 11:45:56.0000000 11:45:56.0000000 11:45:56.0000000

400001001010000 400001001010000 11:45:56.0000000 11:45:56.0000000 11:45:56.0000000

400001001010000 400001001010000 11:45:56.0000000 11:45:56.0000000 11:45:56.0000000

Page 32 of 45
 Buy Location ID Sell Location ID Buy Order Time Sell Order Time Trade Time Buy Location ID Sell Location ID Buy Order Sell Order Trade Time
Time Time

4000010800800188 4000010800800188 09:17:56.5490330 09:18:27.8673850 09:18:28.6025490 4011010765765188 4011010765765188 09:38:22.4821750 09:38:20.3083470 09:38:22.5593520

4000010800800188 4000010800800188 09:24:08.1926210 09:23:12.0281730 09:24:08.3235090 4011010765765188 4011010765765188 10:22:59.9377420 10:23:02.4853890 10:23:02.5214570

4000010800800188 4000010800800188 09:20:07.1130410 09:20:08.6221130 09:20:09.3793000 4011010765765188 4011010765765188 11:12:50.2171950 11:12:53.7963110 11:12:53.8286420

4000010800800188 4000010800800188 09:19:50.5102070 09:19:55.6364610 09:19:56.3910460 4011010765765188 4011010765765188 11:19:59.1073820 11:19:57.8769650 11:19:59.2021930

4000010800800188 4000010800800188 09:18:45.4077580 09:19:55.6364610 09:19:56.3917230 4011010765765188 4011010765765188 11:20:12.0170350 11:20:07.1522380 11:20:12.0429090

4000010800800188 4000010800800188 09:45:15.0840560 09:45:15.6074170 09:45:15.6162390 4011010765765188 4011010765765188 11:20:55.2376760 11:20:53.8932610 11:20:55.3059850

4000010800800188 4000010800800188 09:24:07.7245170 09:24:08.1724700 09:24:08.8607330 4011010765765188 4011010765765188 11:24:39.8398510 11:24:40.2263970 11:24:40.2339060

4000010800800188 4000010800800188 09:19:15.6613290 09:18:33.4623950 09:19:18.7330270 4011010765765188 4011010765765188 11:25:13.8879050 11:25:17.5394160 11:25:17.5527330

4000010800800188 4000010800800188 09:17:56.5490330 09:18:27.8495420 09:18:28.6025470 4011010765765188 4011010765765188 11:27:45.3816900 11:27:39.2272460 11:27:45.4050820

4000010800800188 4000010800800188 09:17:02.4273190 09:17:02.2916630 09:17:02.4378210 4011010765765188 4011010765765188 11:44:26.1138860 11:44:27.0994260 11:44:27.3372410

4000010800800188 4000010800800188 10:17:55.4976990 10:18:02.2456280 10:18:03.4814340 4011010765765188 4011010765765188 11:45:11.3880910 11:45:10.1981870 11:45:12.2007530

4000010800800188 4000010800800188 11:33:53.1482080 11:33:51.6593950 11:33:53.1770810 4011010765765188 4011010765765188 12:01:36.0503680 12:01:33.6699260 12:01:37.5266180

4000010800800188 4000010800800188 11:39:33.7409700 11:39:35.5629990 11:39:35.7422240 4011010765765188 4011010765765188 13:11:53.3033840 13:12:47.0690800 13:12:47.0922000

4000010800800188 4000010800800188 11:52:42.7273220 11:52:18.5203340 11:52:45.6319980 4011010765765188 4011010765765188 13:16:05.9536560 13:16:03.0741570 13:16:05.9923930

4000010800800188 4000010800800188 12:04:01.5621530 12:04:01.1470590 12:04:02.0312740 4011010765765188 4011010765765188 13:16:05.9536560 13:16:03.1320950 13:16:05.9933110

4000010800800188 4000010800800188 12:04:13.6325810 12:03:58.1778220 12:04:14.4455130 4011010765765188 4011010765765188 13:16:05.9536560 13:16:03.1325930 13:16:05.9936540

4000010800800188 4000010800800188 12:05:58.0973580 12:05:59.8831700 12:05:59.9674160 4011010765765188 4011010765765188 13:19:53.5370840 13:19:53.4660850 13:19:54.4118430

4000010800800188 4000010800800188 12:31:57.2417480 12:32:24.9481560 12:32:24.9724340 4011010765765188 4011010765765188 13:25:06.3652990 13:25:06.7669950 13:25:06.8110260

4000010800800188 4000010800800188 12:59:16.7601370 12:58:58.3905270 12:59:18.0212060 4011010765765188 4011010765765188 13:27:33.5754160 13:27:43.3743180 13:27:43.4433630

4000010800800188 4000010800800188 13:20:04.6236190 13:20:03.7261330 13:20:04.6777910 4011010765765188 4011010765765188 13:45:37.3733060 13:45:37.7174170 13:45:37.7322880

4000010800800188 4000010800800188 13:24:21.1548640 13:24:22.1169390 13:24:22.1861570 4011010765765188 4011010765765188 14:15:59.1195550 14:16:00.2785100 14:16:00.3055160

4000010800800188 4000010800800188 13:28:05.8259200 13:28:08.6068960 13:28:08.6548910 4011010765765188 4011010765765188 14:15:59.1574550 14:16:00.2785100 14:16:00.3056920

4000010800800188 4000010800800188 13:31:08.2962960 13:31:08.8676890 13:31:08.8839740 4011010765765188 4011010765765188 14:17:26.8142410 14:17:27.8009470 14:17:27.8145970

4000010800800188 4000010800800188 13:36:57.2009170 13:36:54.4448300 13:36:57.2726050 4011010765765188 4011010765765188 14:19:53.8964230 14:19:54.4889660 14:19:54.5222820

4000010800800188 4000010800800188 13:49:04.8700030 13:49:05.0287500 13:49:05.0765530 4011010765765188 4011010765765188 14:20:03.4573080 14:19:58.5121990 14:20:04.7700770

4000010800800188 4000010800800188 13:49:04.8700030 13:49:05.0861930 13:49:05.0962980 4011010765765188 4011010765765188 14:20:03.4573080 14:19:58.7176420 14:20:04.7701120

4000010800800188 4000010800800188 13:49:05.9976460 13:49:04.8344690 13:49:07.7108020 4011010765765188 4011010765765188 14:20:03.4573080 14:19:58.5934730 14:20:04.7701250

4000010800800188 4000010800800188 13:50:56.0931860 13:51:03.6288440 13:51:04.3132070 4011010765765188 4011010765765188 14:21:42.6852440 14:21:40.7336870 14:21:42.7254240

4000010800800188 4000010800800188 13:51:10.1428580 13:52:48.0110520 13:52:50.0142440 4011010765765188 4011010765765188 14:24:01.9749700 14:24:01.0943450 14:24:02.5153910

4000010800800188 4000010800800188 14:04:35.6811640 14:04:37.8632230 14:04:37.8710010 4011010765765188 4011010765765188 14:25:14.5711840 14:24:05.1035570 14:25:14.6182630

4000010800800188 4000010800800188 14:04:52.9032850 14:04:52.2202070 14:04:52.9586080 4011010780780188 4011010780780188 10:09:14.3407360 10:09:25.3113410 10:09:26.3800450

4000010800800188 4000010800800188 14:15:30.4193530 14:15:31.5579450 14:15:31.5975270 4011010780780188 4011010780780188 09:27:41.7020220 09:26:18.4745560 09:27:41.7985270

4000010800800188 4000010800800188 14:15:30.4193530 14:15:31.5943740 14:15:31.6154500 4011010780780188 4011010780780188 09:27:41.7020220 09:26:35.4994870 09:27:41.7987470

4000010800800188 4000010800800188 14:15:30.4193530 14:15:31.7035380 14:15:31.7389740 4011010780780188 4011010780780188 10:22:06.6222870 10:22:04.2184450 10:22:06.6280970

4000010800800188 4000010800800188 14:21:26.0021520 14:21:27.8830050 14:21:28.8177410 4011010780780188 4011010780780188 10:20:37.1386980 10:22:04.7005980 10:22:08.4588220

4000010800800188 4000010800800188 14:21:26.2829700 14:21:27.8830050 14:21:28.8177440 4011010780780188 4011010780780188 10:20:37.1386980 10:22:04.7105390 10:22:08.4588510

4000010800800188 4000010800800188 14:56:46.9781950 14:56:45.1909380 14:56:47.2162450 4011010780780188 4011010780780188 11:33:41.5734850 11:33:44.5799970 11:33:47.1998820

4000010800800188 4000010800800188 15:07:18.3059890 15:07:18.7607470 15:07:19.8033490 4011010780780188 4011010780780188 13:21:57.7608430 13:44:23.8060590 13:44:23.8186390

4000010800800188 4000010800800188 15:21:55.0519000 15:21:53.6631680 15:21:55.2890980 4011010780780188 4011010780780188 13:46:53.5194220 13:46:52.1388430 13:46:53.5344860

4000010800800188 4000010800800188 15:23:58.9023500 15:23:58.3890450 15:23:58.9302940 4011010780780188 4011010780780188 14:54:15.5865150 14:54:16.4894170 14:54:16.5312710

Page 33 of 45
 Buy Location ID Sell Location ID Buy Order Time Sell Order Time Trade Time Buy Location ID Sell Location ID Buy Order Sell Order Time Trade Time
Time

4011010780780188 4011010780780188 14:57:04.1839970 14:57:02.5999770 14:57:04.6579340 4011010780780188 4011010780780188 15:23:17.1898980 15:23:16.1686600 15:23:17.3510850

4011010780780188 4011010780780188 15:22:59.9543560 15:23:02.6170210 15:23:02.6568430

54. It is not out of place to mention that if the Noticee was genuinely trading in the scrip,
then, it should have adopted such modus operandi which is permissible / fair enough
and in accordance with regulatory framework, but not such strategy which is not
warranted under law. Such placing of orders with no time difference or very less time
difference, itself pre assures the executor / Noticee that its respective buy/sell orders
are most likely to match with itself only. By adopting such mechanism/modus
operandi of selling/buying shares to itself during entire listing day in high volumes as
compared to total market that too many of them from same terminal, reveals
fraudulent / manipulative intent of the Noticee to match its respective orders with
itself without changing the ownership in such shares, and its intent to create
misleading appearance of trading.

55. Further, I am of the view that even if the investigation period was limited to only one
day, but, the scale of volumes that was exercised by the Noticee in just one day
alone, is very substantial to clearly indicate the manipulative intention of the Noticee
to create misleading appearance of trading in the share of SIL. It goes without saying
that trading in a particular scrip on its listing day, bears a lot of significance in terms
of scrip marketability as the voluminous trading depth into scrip on the day of listing,
creates / indicates positive move in the scrip and practically, the investors are most
likely influenced on the outcome of first day trading in the scrip after it is listed. If on
the day of listing, an impression is created that scrip is doing well in terms of volume /
price, then, certainly market participants / investors are lured to deal into such scrip.

56. Here, in order to examine/strengthen aforesaid observations, I am inclined to analyze

the impact of such self-trading on the subsequent days in the scrip. From the
available records, it is noted that on March 11, 2011, the scrip opened at ` 74.00 at
BSE and at ` 80.05 at NSE registering a high of ` 113.10 on both stock exchanges
and closed at ` 117.70 on BSE and ` 117.35 on NSE. Total shares traded were
3,43,12,272 shares on BSE and 4,04,07,612 shares on NSE. It is noted that post
the listing day, scrip opened at ` 113.10 at NSE and at ` 115.10 at BSE and high

Page 34 of 45
 price went up to ` 138.50 on both Stock Exchanges and remained closed at higher
price as compared to closing price of listing day. Also, the volume on subsequent
days went much high (almost 3 times more as compared to listing day) at both the
Stock Exchanges. The comparison regarding volume / price etc. in the scrip of SIL at
the time of listing (investigation period) and post investigation, is shown in below
table;
BSE
Period Duration Opening Closing Low Price/Vol High Avg no of Total Vol of
Price/ vol on Price/ Vol on during the Price/Vol shares shares
1st day of last day of Period(`) during the traded traded
period(`) period(`) Period(`) daily
during the
period
Investigation 11.03.2011 Price 74.00 113.10 74.00 117.70 3,43,12,272

115.10 103.55 87.25 138.50

Price
Post- (14.03.2011 - (15.03.2011) (30.06.2011) (21.03.2011) (02.05.2011)
13,78,120 10,47,37,189
Investigation 30.06.2011) 1,59,59,833 86,332 32,698 1,59,59,833
Vol
(15.03.2011) (30.06.2011) (16.06.2011) (14.03.2011)

NSE
Avg no of
Opening Closing High shares
Low Price/Vol
Duration Price/ vol on Price/ Vol on Price/Vol traded Total Vol of
during the
Period 1st day of last day of during the daily shares traded
Period(`)
period(`) period(`) Period(`) during the
period

Investigation 11.03.2011 Price 80.05 113.10 80.05 117.35 4,04,07,612

113.10 103.30 87.10 138.5

Price
Post- (14.03.2011 - (14.03.2011) (30.06.2011) (21.03.2011) (02.05.2011)
16,79,116 12,92,91,979
Investigation 30.06.2011) 2,17,07,560 93,603 39,228 2,17,07,560
Vol
(14.03.2011) (30.06.2011) (20.06.2011) (14.03.2011)

57. From the above, undoubtedly, it is clear that the substantial trading done by the
Noticee (who was extremely the top buyer/seller in the scrip when compared to other
stock broker/clients) on the day of listing, had the positive bearing / caused impact in
the scrip of SIL on subsequent days.

58. Needless to say that the Noticee being a market intermediary and despite supposed
to know the norms laid down under securities laws (particularly certain prohibitory
norms under PFUTP Regulations) and the various consistent judgments of Hon’ble
SAT holding person liable for self-trades, it should have not indulged into such large
manipulative transactions by adopting manipulative modus operandi as discussed
above.

Page 35 of 45
59. Now, I come to deal with certain contention/plea taken by the Noticee under its
aforestated letters. The Noticee submitted that complete trade logs were not
provided and the trade logs so provided does not contain the NEAT CTCL ids at
NSE and IML ids in case of BSE to ascertain whether the self trades happened at
the level of Member or at Terminal level. In respect to said submissions, I am of the
view that all the relevant trade logs as derived from the Stock Exchange’s records
have been provided to the Noticee in a CD along with the SCN and also the
complete all trade logs in the scrip of SIL covering location IDs as well, have been
provided during the course of inspection as mentioned at pre-paras. In fact, the
details of buy/sell location IDs are explained / shown as an example at page 30-34
above.

60. I have also noted that during the course of inspection, copy of list of self trades which
occurred in the scrip of SIL by different stock brokers (whether from the same
terminal or otherwise) on the date of listing March 11, 2011 and complete trade logs
of the SIL scrip between March 11, 2011 to March 13, 2011 (including details of
NEAT CTCL terminal at NSE and the IML IDs at BSE) have been provided to the
Noticee on November 04, 2015 which in fact has been so accepted by the
representative of the Noticee (as can be seen from the said inspection minutes).

61. Also, in respect to location IDs, vide communique dated October 01, 2015, it has
been clearly stated to the Noticee that the said details have been derived from the
Exchange records and are sufficient to demonstrate the role of Noticee into self-
trades. As stated above, neither the Noticee had specifically filed reply alongwith
evidence about location IDs nor it gave any details of the IDs from where it had
executed the trades in this matter. In view of above, such plea / contention is not
acceptable at all in absence of any substance / proof or in absence of any rebuttal of
facts / allegation as leveled under the SCN. Moreover, as observed above, the
Noticee had dealt in substantial number of self-trades in its proprietary account only
and being an intermediary, it is supposed to have all such records of self-trades.
Surprisingly, at one hand the Noticee disputes that it is not clear as to from which IDs
the trades took place and on the other hand it states that such self-trades are
accidentally resulted and are not manipulative.

Page 36 of 45
62. As established above that all the relevant trade order log has been provided to the
Noticee to reply towards the allegations / SCN, therefore, the trade / order log
pertaining to the period 2011-2016 as asked by the Noticee (which in fact is out of
the investigation period) is not relevant at all.

63. The submission of the Noticee that the said trades were executed through
Algorhythmic Software duly approved by BSE and NSE and no adverse observations
were made by the Exchanges in respect to self-trades, is not acceptable in view of
the aforesaid detailed observations / examination regarding modus operandi adopted
by the Noticee. Also, at this juncture, it is relevant to refer a judgment of Hon'ble SAT
in case of H J Securities Pvt. Ltd. v/s SEBI (Appeal No. 76/2012) decided on May 11,
2012 wherein it was held that-

"The modus-operandi of the appellant in operating through the 19 jobbers from different
locations has resulted in fictitious trades / self trades where the buyer and the seller are the
same party. Such trades create artificial volume in the traded scrip and send wrong signal to
the lay investor with regard to trading in the scrip. ……………………........ If the appellant
was operating through jobbers from different terminals, he should have placed some
mechanism in place to ensure that his trades do not result in self trades. Simply because the
number of such self trades is not large by itself cannot justify execution of self trades. The
appellant is free to adopt any business model but he has to ensure that whatever business
model he adopts, it is in conformity with the regulatory framework".
Since the business model adopted by the appellant has resulted in self trades which are
considered to be fraudulent, we cannot find any fault with the impugned order which has
held the appellant guilty of violating the provisions of FUTP regulations as well as code
of conduct for the stock brokers”.

64. In light of above, the plea of the Noticee that it cannot be held liable for the self
trades resulted under Algo trading, does not hold any merit as the findings / rulings of
Hon’ble SAT had categorically upheld that the stock broker can adopt any business
model, but, he has to ensure that whatever business model he adopts, it is in
conformity with the regulatory framework and if the business model adopted by him
has resulted in self trade, then, he is guilty of violating the provisions of PFUTP
Regulations and the code of conduct for the stock brokers.

Page 37 of 45
65. I have taken note of a recent order passed by another Ld. Adjudicating Officer of
SEBI on June 22, 2017 (viz. Crosseas Capital Services Pvt. Ltd. vide order Ref. No.
EAD/AO-NP/SJ/50/2017) wherein the person charged for self trades was exonerated
with the observations that gross buy and sell of the said person in the scrip was not
significant in comparison to the market buy/sell volume during the investigation
period as the volume of self-trade was less than 1% of the total market volume as
said person’s contribution towards the total market volume was only 0.94% at BSE
and 0.30% at NSE.

66. In another order of Ld. Adjudicating Officer of SEBI dated November 27, 2013 (viz.
Crosseas Capital Services Pvt. Ltd. vide order Ref. No. EAD-2/DSR/RG/07/2013) as
relied by the Noticee in its support, the total traded volume in self trades of said
person was only 0.67% when compared to total market volume in the scrip.

67. Whereas in the instant case, as observed that the Noticee had indulged into self
trades in the scrip of SIL for 2.42% (quantity 8,31,677) of the total market volume at
BSE and 1.55% (quantity 6,28,461) of the total market volume at NSE. The
difference between instant case when compared to aforesaid two orders of Ld.
Adjudicating Officers of SEBI, are tabulated below;

Details of Case % of Self-Trade to Quantity / Number of Self No. of Days

Total Market Trades
Adjudicating Officer dated June 0.94% at BSE 6,03,590 shares at BSE 3 days
22, 2017 Ref. No. EAD/AO- 0.30% at NSE 3,14,576 shares at NSE
NP/SJ/50/2017 (Total of both Exchanges
9,18,166 shares
Adjudicating Officer dated 0.67% 9,81,186 shares 1 day
November 27, 2013 Ref. No. (Listing day)
EAD-2/DSR/RG/07/2013)

Present Adjudication Case 2.42% at BSE 8,31,677 at BSE 6,28,461 at 1 days

1.55% at NSE NSE (Listing day)
(Total 3.97% at (Total 14,60,138 shares at Para 55- 57
both Exchanges) both Exchanges above may
be seen.

Page 38 of 45
68. In view of the analysis made by me in respect of manipulative modus operandi
adopted by the Noticee / taking into account various aspects (viz. volumes /
percentage to total market / entire day trading / time difference in placing buy as well
as sell orders, same location IDs, impact of such trading in subsequent days as
mentioned in para 55-57 above etc.), the instant case is apparently distinguishable
from the aforesaid two order passed by the Ld. Adjudicating Officers.

69. The submission of the Noticees that there was no specific guidelines either from the
Exchanges or from SEBI on "self trades", is not accepted in view of the aforesaid
various consistent well settled judgments of the Hon’ble SAT on self trades and in
view of regulation 4 (2)(g) of the PFUTP Regulations which states -

4. Prohibition of manipulative, fraudulent and unfair trade practice

(2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it
involves fraud and may include all or any of the following, namely:-
(g) entering into a transaction in securities without intention of performing it or without
intention of change of ownership of such security;

70. The reliance placed by the Noticee on recommendation of SMAC, cannot be accepted
in view of prohibition laid down under PFUTP Regulations and in view of aforesaid
findings. Another plea of the Noticee that SEBI has not taken action against other
stock brokers, is also not accepted as from the records, it is clear that Noticee was the
top stock broker / client in terms of its indulgence into self-trades / volume generation
in the share of SIL on the day of listing. The issue raised by the Noticee regarding
WTM’s jurisdiction in appointing Adjudicating Officer / undersigned, stands without
any basis and hence cannot be accepted in light of above observations.

71. As regards to the contention of the Noticee that HFT Algo Trading results into self
trades and earlier 30% to 40% of all Exchange Member’s trades resulted into self-
trades, is not convincing / without any rational and has no relevance especially when
manipulative intent of the Noticee behind execution of self-trades is established.

72. Further, Noticee’s contention that aforesaid self –trades were incidental and in
support vide letter dated June 01, 2017 relied an Affidavit of BSE dated October 09,

Page 39 of 45
 2015 and a brief Note made by it along with its letter dated February 20, 2017. The
said contention of the Noticee cannot be accepted as it is well established at pre
paras of this order that Noticee’s self-trades had contributed (2.42% at BSE and
1.55% at NSE) of total market volume in the shares of SIL which is substantial in
nature to have impact in the scrip. Also, its own total percentage of trading on that
day in such self-trades, were 15.37% at BSE and 6.2% at NSE (total more than
21%). Apparently, such substantial self-trades cannot occur by mere incidence. The
fraudulent intention to create misleading appearance of trading, can be very clearly
seen from the observations made by me at pre paras of this order analyzing various
aspects and same are not repeated here for sake of brevity.

73. Besides, I also cannot ignore the fact that even the BSE affidavit at para 12 is not in
agreement with Noticee and conveys the meaning that the motive/manipulative
nature of transaction can be proved. The said para is produced as under-
“With reference to paragraph 6(VII) of the Appeal, I deny that the issue of motive and
manipulative nature of carrying on fictitious transactions in the market does not get proved
as all transactions are in the market and as per the order matching mechanism of the stock
exchanges of NSE/BSE”.

74. Here, it is also relevant to mention a reference made by the BSE at para 15 of said
Affidavit which says that the Appellant (Noticee in this case) is not precluded from
implementing appropriate checks and balances as a responsible market intermediary
as algorithmic trading are permitted as per required conformity with certain risk
management checks.

75. As regards to the submission of the Noticee that the alleged transactions took place
as result of its arbitrage strategy, I am of the opinion that it is impractical to earn
‘arbitrage’ as the buyer and the seller in such self-trading remains the same person
and no beneficial ownership of shares is thereby changed. The concept of arbitrage
applies to trading at different Market / Exchange(s) or different segment so as to
derive the benefit of price difference from both the Exchange(s); and certainly not
from the trading on the same Exchange / Segment (as done in this case). As it has
been a consistent market practice and being an intermediary, the Noticee is

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 supposed to be aware of “arbitrage” concept.’ At this juncture, it would be
appropriate to refer an important recent judgment of Hon’ble Income Tax Tribunal in
the case of M/s. Lohia Securities Ltd. Vs. DCIT, Circle-6, Kolkata (in appeal No.
ITA No. 487/Kol/2012 A.Y 2008-09) decided on December 09, 2015, whereby the
term “arbitrage” was discussed as under:

“In case of arbitrage / hedging activities, the company takes a position in one segment of the
exchange and simultaneously reverse position is taken in another segment. For example if
company buys JP Hydro in capital market segment, then the company also simultaneously
sells the same quantity and script in derivatives segment. In case if the transaction get
reversed in the same day, profit or loss arising on the said transaction in the capital market
segment booked as intra- day profit / loss or if the trade is reversed on next day or subsequent
day, the profit / loss arising on the said transaction in the capital market segment is booked as
delivery based profit / loss”.

76. In view of aforesaid observation, the plea of ‘arbitrage’ is not acceptable. Further, the
contention of the Noticee that SEBI has proceeded against it merely on the basis of
occurrence of self-trade as no intention has been imputed and no dimension of
manipulation has been brought out in investigation report. I do not agree with such
plea in light of observation made by me at pre paras. Also, investigation report clearly
indicates at page 11 “…it was seen that Crosseas Capital Services Pvt. Ltd. had
entered into repeated self trades at BSE and NSE, thereby leading to misleading
appearance of trading in securities and without intention of change in ownership of
such securities ….”.

77. Noticee also took plea that these were merely self trades and no manipulative
intention was shown as is clear from communique / notice dated August 22, 2016
stating - “SCN alleges your indulgence into manipulative trades (self trades) and
therefore primarily you are required to submit whether the alleged trades has been
executed by you or not." In this respect, it is observed that undersigned had not
issued letter dated August 22, 2016 in this matter as claimed. The said contents
have been indicated in hearing notice dated October 01, 2015. However, Noticee not
only wrongly interpreted the same, but, also tried to mislead. As all the necessary
documents / CD as available on records were provided, therefore, in that context,
vide said notice dated October 01, 2015, Noticee was inter-alia asked to primarily
submit reply either admitting or negating with proof the fact of execution of said

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 alleged self-trades without further delaying the present adjudication proceeding.
Such interpretation of the Noticee is unfounded and clearly indicates its motive to
delay / mislead in the matter.

78. In view of the aforesaid analysis / observations (viz. volumes / percentage to total
market volumes / entire day trading / time difference in placing buy as well as sell
orders, same location IDs, impact of such trading in subsequent days etc.), it is
concluded that the Noticee with malafide intention had executed such large self-
trades with an intent to create misleading appearance of trading without intention to
change the ownership of such securities. Further, the Noticee being a registered
stock broker / registered intermediary is also supposed to follow the code of conduct
while carrying out its business activities. As per clause A (3), (4) & (5) of the Code of
Conduct under Schedule II of the Stock Brokers Regulations, the stock broker shall
not indulge in manipulative, fraudulent, deceptive transactions or shall not create
false market or shall not indulge in any act detrimental to the investor’s interest with a
view to distorting market equilibrium.

79. Therefore, I am of the view that by such manipulative act / practice / artifice /
mechanism and failure to comply with the code of conduct, the Noticee had violated
regulation 3 (a), (b), (c) & (d), regulation 4 (1) & 4 (2) (a) & (g) of the PFUTP
Regulations and clause A (3), (4) & (5) of the Code of Conduct under Schedule II of
Stock Brokers Regulations.

ISSUE NO. 3 & 4

Does the violations, on the part of the Noticee attract monetary penalty under
sections 15 HA and 15HB of the SEBI Act? And If yes, then, what would be the
monetary penalty that can be imposed upon the Noticee taking into
consideration the factors mentioned in section 15J of the SEBI Act read with
rule 5 (2) of the Adjudication Rules?

80. Since the violation on the part of the Noticee has been established, therefore, I am of
the view that the aforesaid violations makes the Noticee liable for penalty under
Section 15HA and Section 15HB of SEBI Act, 1992 which read as follows:
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 “Penalty for fraudulent and unfair trade practices
15HA. If any person indulges in fraudulent and unfair trade practices relating to securities,
he shall be liable to a penalty of twenty-five crore rupees or three times the amount of profits
made out of such practices, whichever is higher.

Penalty for contravention where no separate penalty has been provided

15HB. Whoever fails to comply with any provision of this Act, the rules or the regulations
made or directions issued by the Board thereunder for which no separate penalty has been
provided, shall be liable to a penalty which may extend to one crore rupees.”

81. While determining the quantum of penalty under sections 15HA and 15HB, it is
important to consider the factors stipulated in section 15J of SEBI Act read with rule
5 (2) of the Adjudication Rules, which reads as under:-

“15J - Factors to be taken into account by the adjudicating officer

While adjudging quantum of penalty under section 15-I, the adjudicating officer shall have
due regard to the following factors, namely:-
(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as
a result of the default;
(b) the amount of loss caused to an investor or group of investors as a result of the default;
(c) the repetitive nature of the default.”

82. It is noted that available records does not specify the disproportionate gains or unfair
advantage made by the Noticee or the specific loss suffered by the investors due to
such self trades. It is seen from page 15 of the Investigation report that several
actions has been initiated by SEBI against the Noticee resulting into penalty.

83. Though, as observed above, no quantifiable unfair / disproportionate gain was shown
to have been acquired by the Noticee in such self trading, however, I cannot ignore
the gravity of violations involved in the matter. As established that Noticee had
executed large volumes of manipulative self trades which resulted 2.42% of the total
market volume in the scrip of SIL at BSE and 1.55% of the total market volume at
NSE (around 4% at both the Exchanges) and in my opinion, indulging into such
substantial percentage/numbers of self-trades with manipulative intent to create
misleading appearance of trading (as analyzed in pre paras of this order), certainly is
in the nature causing possible adverse impact in disturbing the equilibrium of fair
market mechanism in the scrip of SIL. Also, it has been established at pre paras that
such trading on March 11, 2011 had crucial impact on subsequent days in the scrip
of SIL.

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84. Here, I am also inclined to refer to a judgment of the Hon'ble SAT in case of Angel
Broking Pvt. Ltd. V/s SEBI (Appeal No. 46/2014) decided on October 01, 2014 whereby
penalty of ` 10 Lakh for violation of PFUTP Regulation and ` 10 Lakh for violation of
code of conduct of Stock Brokers Regulations for allegation of self-trading was
upheld. The said penalty of ` 20 lakh was upheld for execution of only 4 self-trades
involving 9866 shares executed by the appellant in just 2 days, whereas, the
Noticee’s indulgence into such trades are much higher as discussed above.

85. Certainly, the instant case involves severe gravity and taking into account aforesaid
aspects, I am of the view that a justifiable penalty needs to be imposed upon the
Noticee to meet the ends of justice.

ORDER

86. Therefore, after taking into consideration all the facts and circumstances of the case
and in exercise of power conferred upon me under section 15 I of the SEBI Act read
with rule 5 of the Adjudication Rules, I hereby under section 15HA of the SEBI Act,
impose a penalty of ` 1,00,00,000/- (Rupees One Crore only) upon the Noticee for
violation of regulation 3 (a) - (d), 4 (1) & 4 (2) (a) & (g) of the PFUTP Regulations and
` 10,00,000/- (Rupees Ten Lakh only) under section 15HB of the SEBI Act for
violation of clause A(3), (4) & (5) of the Code of Conduct under Schedule II read with
regulation 7 of the Stock Brokers Regulations.

87. I am of the view that the said penalty would commensurate with the violations
committed by the Noticee.

88. The Noticee shall remit / pay the said amount of penalty within 45 days of receipt of
this order either by way of Demand Draft in favour of “SEBI - Penalties Remittable to
Government of India”, payable at Mumbai, OR through e-payment facility into Bank
Account the details of which are given below;

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 Account No. for remittance of penalties levied by Adjudication Officer
Bank Name State Bank of India
Branch Bandra-Kurla Complex
RTGS Code SBIN0004380
Beneficiary Name SEBI – Penalties Remittable To Government of
India
Beneficiary A/c No. 31465271959

89. The Noticee shall forward said Demand Draft or the details / confirmation of penalty
so paid to the Chief General Manager of Enforcement Department of SEBI. The
format for forwarding details of e-payments shall be made in the following tabulated
form as provided in SEBI Circular No. SEBI/HO/GSD/T&A/CIR/P/2017/42 dated May
16, 2017 and details of such payment shall be intimated at e-mail ID-
tad@sebi.gov.in

Departme Name of Type of SEBI PAN Amount Purpose of Bank name UTR
nt Intermediary/ Intermedi Registratio (in `) Payment and No
of SEBI Other Entities ary n (including Account
Number the period for number
Date (if any which payment from which
was made e.g. payment is
quarterly, remitted
annually

90. In terms of rule 6 of the Adjudication Rules, copies of this order are sent to the
Noticees and also to the SEBI.

Date: September 28, 2017 (RACHNA ANAND)

Place: Mumbai GENERAL MANAGER &
ADJUDICATING OFFICER

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