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Major COVID Relief By SEBI: Settlement Scheme for Illiquid Stock Options Segment Extended till 31st Dec

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Major COVID Relief By SEBI: Settlement Scheme for Illiquid Stock Options Segment Extended till 31st Dec

“Entities who do not avail the one-time settlement opportunity will be liable for action after the expiry/last date of the scheme.”


A Much-Needed Relief!

SEBI recently announced the extension of dates for the one-time stock options segment settlement scheme offered by it for entities that were involved in the execution of reversal of trades in the BSE stock options segment during 2014 and 2015. The market regulator was getting numerous requests for extension of the scheme due to the large-scale disruption caused by COVID-19 pandemic. The Settlement scheme was introduced by the SEBI in July and commenced from August 1st, 2020. The previous end date for the scheme was set on 31st October but the critical situation created by COVID-19 led to SEBI extending the date of the scheme to let more entities avail the scheme. SEBI in its statement quoted,

“Upon consideration of the same, the competent authority has approved the extension of the period of the scheme till December 31, 2020,”.

What Is the Scheme and What Will be its Impact on stock Options Segment?

Under the scheme, any financial entity which was involved in the trade reversal of the stock options segment of the BSE form 1 April 2014 to 30 September 2015 and have pending proceedings can use this scheme to avail the settlement. The SEBI will consider three parameters to arrive at the indicative settlement amount. The parameters are no. of non-genuine trades, artificial volume, and no. of contracts resulting in the creation of the non-genuine trades. Further, according to the SEBI’s notice, entities must avail this opportunity in the timeframe of the scheme or there will be action taken against them.

How SEBI Found this Irregularity?

As a part of its surveillance, SEBI noticed that several entities were consistently making losses by trading in options or individual stocks of BSE. The losses were reversed with the same counterparties either on the same day or the next day. This appeared abnormal and therefore, SEBI started analysis of stock options segment from April 2014 to September 2015. After the analysis, SEBI observed that,

“From the 21652 entities executing trades on the BSE stock options segment, 14720 entities generated artificial volume by executing reversal or non-genuine trades on the same day”. 

The SEBI thus introduced this scheme to offer the opportunity of one-time settlement to these entities. If an investment entity needs help regarding this scheme, then they can consider taking help from any legal and financial consultancy firm.

Author: Adv Sharlee Garg
Muds Management Private Limited
Mobile number: 91-9599653306
Email id: [email protected]

*The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article*

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