Markets regulator Sebi has sounded an alarm over dabba trading-an illegal form of off-market securities trading-after spotting a bold newspaper advertisement promoting it.
The full-page ad, published in a Hindi daily on July 13, promised high-margin trading and registration without any paperwork-red flags for the regulator. Sebi responded by filing a complaint with cyber police and alerting the Advertising Standards Council of India (ASCI) to probe the ad for rule violations and take appropriate corrective measures.
Reiterating that dabba trading is a punishable offence, Sebi urged investors to stay alert. “Dabba trading refers to illegal and unregulated off-market trading that operates outside the purview of recognized stock exchanges and regulatory oversight. Such activities pose significant risks to investors and are a violation of various provisions of the Securities Contracts (Regulation) Act, 1956 (SCRA), SEBI Act, 1992, and Bhartiya Nyay Sanhita, 2023,” it said.
The National Stock Exchange (NSE) had issued a similar cautionary notice just last week, warning market participants about the dangers of dealing with unregistered operators.
Sebi emphasized that dabba trading operates completely outside the formal market infrastructure-no real trades are recorded on stock exchanges, and there is no regulatory oversight or investor protection. The practice, it said, poses serious risks and is in direct violation of securities laws.
Understanding dabba trading
At its core, dabba trading is unregulated and off-the-record. No actual buying or selling of shares occurs on stock exchanges. Instead, traders make bets on how stock prices will move, and the dabba operator settles gains and losses in cash, entirely outside official channels.
Since these trades are never routed through Sebi-recognized exchanges, investors miss out on legal protections and grievance redressal systems. In simple terms, dabba trading mimics gambling on stock price movements.
How it works
According to an explanation on Groww, in one model, a trader might place an order to buy 50 shares of a company at Rs 200 through a dabba broker. The broker finds a seller within the dabba network and connects them. The transaction is off-market, and the broker earns a commission.
In another setup, traders simply bet on stock prices. For instance, if someone wagers that a stock will rise from Rs 300 to Rs 350 within a week and it does, they earn a profit. But if the price drops instead, the trader loses money-and the broker gains.
These shadow trades offer no transparency, no records, and no legal safety net-something Sebi is clearly aiming to crack down on.
Key highlights from the SEBI and NSE actions
SEBI flags misleading ad: SEBI issued a formal notice to Navbharat over an advertisement promoting illegal trading practices that could mislead investors.
Cyber police complaint filed: A complaint has been lodged with the cyber police, seeking legal action against the entity behind the ad and others involved.
NSE issues investor alert: The National Stock Exchange released a caution advising investors to avoid dabba trading and to trade only through SEBI-registered brokers and recognized stock exchanges.
ASCI notified: The matter has been referred to the Advertising Standards Council of India (ASCI) to review violations and ensure corrective measures are taken.