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The Original CHAUKIDAAR ,“TAKEOVER WATCHMAN” since 2007. CA. Arun Goenka* hands-on experience in the share market* deep knowledge of laws and account*one of the early players, pioneered an investment strategy in TAKEOVERS*The WIRC - of The Institute of Chartered Accountants of India, has honoured him with the ‘Recognition of CAs in Social Service’. * often invited by National business news; electronic and print media, for his views on SEBI related matters. * history of red-flagging 100+ cases to SEBI* contributes by giving inputs in drafting amendments to the regulation* Some of the suggestions reflected in subsequent regulatory changes: (a). In takeover of Cairn 3,750 Crores non-compete fees waived off and ultimately Removal of Non-compete fee in 2011 (b) November 2009 amending Regulation 11 (1). (c)Listing agreement baring promoters from voting on related party. (d) Disclosure of past performance by merchant bankers in case of IPO (e) SAST 2011 regulation 10(1)(h), (f) Counter Offer in case of Delisting (g) Interest payment to all in case of delays in Open Offers(05.06.20).

Friday, May 26, 2023

Market manipulation on Vallan day- F & O Physical Settlement

 TEXT OF SUGGESTION GIVEN TO SEBI ON 26.05.23

We wish to bring to your notice the market manipulation or last-minute panic reaction/ short covering that takes place because of the rule for compulsory delivery in cash of F&O segment contracts. We request you to please reconsider this decision, which in the minds of investors and market stakeholders is without any merit and results in avoidable additional transaction costs and manipulation. Small traders are trapped and made to lose heavily.  

A small trader had  written a May series CALL of GNFC for 600. The price chart of the share is given in the attached annexure. The investor/trader  was comfortable that he will be able to retain the call writing premium since the CE was OTM. It is pertinent to note that the price of the scrip was hovering around 592 till about 3.28 PM but suddenly shot up in the last one minute with very heavy volume to:

 Cash Rs. 611

May Series last traded 614.05 Vallan closing 603.75

June  Series  610.75

 Any investor would have bought June series at a much lower price rather than May which is expiring in a few seconds. This is all due to the fact of forced physical settlement of F & O trades.

This resulted in the OTM call getting converted to ITM and many small traders /investors getting trapped and will have to face auction and penalty. May we suggest:

1.       Please stop the compulsory physical settlement which only increases the avoidable transaction and workload

2.       If at all you find that Physical settlement cannot be done away, then at least in marginal cases where the price of the underlying securities are above or below 2% of the Strike price of Option, it should not be forced.

3.       The weight average should be taken on the vallan day for the last one hour instead of 30 Minutes as of now.

 

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