SEBI Bars Prrsaar Sampada and Chaubara Eats in Rs 28.12 Crore Cross-Segment Derivatives Manipulation Scheme

India's capital markets watchdog, the Securities and Exchange Board of India (SEBI), has prohibited two Delhi-based trading entities and related individuals from accessing the securities market after uncovering a sophisticated cross-segment price manipulation scheme. Alongside the market ban, the regulator ordered the impounding of alleged wrongful gains amounting to Rs 28.12 crore.

The interim order targets Prrsaar Sampada Private Limited, Chaubara Eats Private Limited, and four associated individuals. The enforcement action followed abnormal trading alerts flagged by the National Stock Exchange (NSE), which prompted SEBI to investigate trading patterns across the futures and options (F&O) segment.

Mechanics of the Cross-Segment Scheme

According to SEBI’s preliminary findings, the entities engaged in an unconventional strategy where the primary objective was not generating profits within the stock futures segment, but rather creating artificial pricing shifts to reap substantial windfalls in related stock options.

The manipulative scheme operated through specific stages:

• Intentional Futures Losses: The entities aggressively placed buy-high and sell-low orders in single-stock futures contracts, knowingly incurring losses in the futures leg of their trades.
• Option Pricing Distortions: The abnormal price action generated in the futures market distorted the implied prices and pricing dynamics of correlated single-stock options contracts.
• Asymmetric Gains: Prior to moving the futures prices, the entities established large opposing positions in stock options, allowing them to close those options contracts at inflated gains that far exceeded the engineered losses taken in the futures segment.

Targeting Lower-Liquidity F&O Counters

SEBI observed that the manipulation was predominantly concentrated in the bottom 100 stocks by market capitalisation among the approximately 211 stocks eligible for trading in the derivatives segment. Stocks in the lower tier of the F&O universe tend to have lower order book depth and liquidity compared to blue-chip benchmarks, making them significantly easier to influence with lower capital requirements.

The investigation also revealed that even after initial regulatory scrutiny and warnings regarding deceptive trading practices, manipulative operations continued by routing activity through Chaubara Eats, an entity connected to Prrsaar Sampada.

Implications for Market Participants

The enforcement action comes at a time when Indian authorities are scrutinising trading turnover and risk concentration in the derivatives market. By executing aggressive orders to intentionally manipulate prices across segments, such trading patterns pose substantial risks to genuine hedgers and retail traders who rely on fair market price discovery.

SEBI stated that immediate ex-parte ad-interim measures were necessary to prevent further distortion of market integrity and to protect public investors from deceptive cross-market practices. A comprehensive investigation into coordinated trading, algorithmic orders, and fund flows between the entities remains underway.

Tags: SEBI Prrsaar Sampada Chaubara Eats National Stock Exchange Equity Derivatives Capital Markets