Price manipulators in the derivative segment seem to be having a field day with incidents of unusual or freak trades in the equity futures and options becoming more frequent on the National Stock Exchange. On Friday, derivative traders witnessed a sharp spike in some options contracts on the NSE. The call option contract for the NSE’s main index Nifty (16450 strike price) for August expiry rose by 800 per cent from ₹100- ₹800. Similarly, put option contract for Bank Nifty index (37000) strike price rose by 2000 per cent from a low of ₹1 to touch a high of ₹2,040.

This is the third such freak trade over the last few months. On July 5, Nifty index futures surged 805 points or over 5 per cent, without any similar rise in the underlying cash market. Weeks later, on July 28, Nifty futures for August expiry crashed 5 per cent or over 531 points to a low of 15,256 from its opening 15,787. On all these occasions, the reversal to normal happened in a few seconds. When contacted, an NSE spokesperson said, “The exchange systems functioned normally and all orders were executed as per the operating range as prescribed by the exchange.”

Unusual price movements

Brokers said the frequency of such trades could be more than just a coincidence. “While market regulator SEBI has been focusing only on manipulation in the cash market segment and penny stocks on the BSE, such highly unusual price movements are becoming frequent on the NSE’s derivative segment and go unreported,” said a broker on conditions of anonymity. Recently, the BSE came under heavy criticism as the exchange attempted to curb manipulation by imposing circuit filters in cash segment stocks that are exclusively listed on its platform. But brokers say that while cash segment attracts draconian price filters and surveillance measures, there is nothing of such sort in the derivatives, leaving the field open for manipulators.

SEBI has been investigating incidents of unusual price moves and manipulation in illiquid derivative contracts on the NSE, but it is yet to make its findings public. Sources say, there were inquiries conducted even by the Mumbai I-T department but the matter has not moved forward due to the complex nature of trades. The department was probing if these derivative trades were for creating artificial loss and avoiding taxes on profits.

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