The Securities Appellate Tribunal on Wednesday overturned the Securities and Exchange Board of India's order regarding Jio Financial Services Ltd. in the Nifty options trade case. SEBI had imposed fines on the company for allegedly manipulating Nifty Futures and Options trades.
The appellate tribunal, while quashing the SEBI order, made specific observations. It was noted that the finding of manipulative trades solely based on a discount to fair value, particularly at 23% and 25%, cannot be accepted without established criteria.
The appellate tribunal criticised the absence of criteria to determine a fair discount percentage and emphasised that trading at a certain percentage below fair value should not automatically be deemed manipulative.
The appellate tribunal pointed out that the National Stock Exchange had issued a circular on Oct. 28, 2022, establishing a band of up to 40% to the reference price. According to this circular, trades executed within this range are considered valid and genuine unless proven otherwise.
The appellate tribunal reasoned that if discounts up to 40% are acceptable from Oct. 28, 2022, onwards, the same principle should apply to transactions occurring before this date.
The SAT held that trades executed at a significant discount alone do not constitute manipulation. It disagreed with the notion that trades deviating from theoretical values are inherently manipulative. The SAT highlighted a 10% difference in fair value determination between Jio Financial and NSE, emphasising that fair value is an indicator, not a definitive measure for classifying a trade as manipulative.
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