Order with respect to Nirshilp Commodities and Trading Private Limited, in the matter of Winsome Yarns Ltd.

Under Sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 In Re: Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 In respect of: S. No. Name of the Entity PAN Nirshilp Securities Pvt. Ltd. (currently known AABCN4361M 1. as Nirshilp Commodities and Trading Pvt. Ltd.) In the matter of Winsome Yarns Ltd.

BACKGROUND 1. Winsome Yarns Ltd. (hereinafter referred to as “WYL / Company”) is mainly involved in the business of producing yarns and manufacturer of cotton, polyester, linen etc. The company is listed on BSE and NSE. 2. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) conducted an investigation in the scrip of WYL based on a reference received from the Principal Director of Income Tax (Investigation), Kolkata. The focus of the investigation was to ascertain whether there were any violations of the provisions of Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “SEBI Act”) and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations”) by certain

Order in the matter of Winsome Yarns Ltd.

entities in the scrip of WYL during the period September 30, 2010 to February 28, 2015 (hereinafter referred to as “Investigation Period”). 3. During the investigation period, corporate announcements were related to AGMs, declaration of financial results, consolidation of share capital, issuance of GDRs, preferential allotment, and other related disclosures. No major impact of the corporate announcements on the scrip price was observed. Further, it is observed from the Investigation Report (hereinafter referred to as “IR”) that the company showed a rise in profit during the year ended March 2011 from a loss of ` 12.07 crore during the year ended March 2010 to ` 6.11 crore and thereafter shows continuous loss between years ended March 2012 to March 2016. 4. Based on the price volume chart, the investigation period has been divided into seven patches as follows:

Period Date Opening Closing Low High Avg. Price price price(volume) Price(volume) Price / (volume) (volume) during the during the No. of on first on last period (`) / period (`) / (shares) day of the day of Date Date traded period(`) the daily period during (`) the period Pre-Invg. 30/06/2010 Price 1.9 2.36 1.83 2.99 2.28 to (12/07/2010) (13/09/2010) 29/09/2010 Volume 32260 299441 15209 2454240 357577 (02/09/2010) (23/07/2010) Investigation 30/09/2010 Price 2.41 4.87 1.9 4.99 2.69 (Patch 1) to (11/02/2011) (18/05/2011) 18/05/2011 Volume 47882 429217 302 1508110 150954 (price rise) (07/02/2011) (14/01/2011) Investigation 19/05/2011 Price 4.98 3.43 3.18 5.11 3.79 (Patch 2) to (27/07/2011) (23/05/2011) 03/08/2011 Volume 280375 10645 5216 350359 111722 (price fall) (23/06/2011) (27/06/2011) Investigation 25/08/2011 Price 36 17.5 17.5 36 24.58 (Patch 3) to (18/11/2011) (25/08/2011) 18/11/2011 Volume 1699 288 1 70913 778172 (price fall) (26/10/2011) (22/09/2011) Investigation 21/11/2011 Price 18.35 31.95 17.25 33.2 23.76 (Patch 4) to (12/12/2011) (15/03/2012)

20/03/2012 Volume 21583 40200 1 83229 811891 (price rise) (30/11/2011) (28/12/2011) Investigation 21/03/2012 Price 14.35 32.5 20.22 (Patch 5) to 31 16 (11/01/2013) (23/03/2012) 21/02/2013 Volume 1 251999 18158 (price fall) 24661 401 (08/02/2013) (14/12/2012) Investigation 22/02/2013 Price 14.25 29.3 19.15 (Patch 6) to 15.25 29.2 (08/03/2013) (29/04/2013) 29/04/2013 Volume 146 259837 35533 (price rise) 1624 259837 (15/04/2013) (29/04/2013) Investigation 30/04/2013 Price 0.99 30 8.93 (Patch 7) to 29.9 1.49 (17/12/2014) (30/04/2013) 28/02/2015 Volume 305 2400255 102522 (price fall) 27198 50419 (11/05/2013) (14/01/2014) Post 01/03/2015 Price 1.54 1 0.9 1.55 1.16 Investigation to (27/05/2015) (09/03/2015) 29/05/2015 Volume 3901 53237 25 365600 46730 (24/04/2015) (30/04/2015)

SHOW CAUSE NOTICE 5. Consequent to the investigation, a show cause notice dated December 15, 2017 (hereinafter referred to as “SCN”) was served on Nirshilp Securities Ltd. (hereinafter referred to as “Noticee”) in the extant matter. The SCN inter alia alleged as follows: a) The Last Traded Price (hereinafter referred to as “LTP”) analysis of the 7 patches was done and the details of Patch 6 is given below: LTP Analysis: Patch 6 - Price rise patch from February 22, 2013 to April 29, 2013:  During this patch, the scrip price opened at ` 15.2 and closed at ` 29.20 on BSE. The net rise in the scrip price is ` 14. On NSE, the scrip price opened at ` 15.80 and closed at ` 29.35. The net rise in the scrip price is ` 13.55.  In order to ascertain whether the sellers have contributed to the price rise during Patch 6 of the investigation period, an analysis of sellers for this patch was carried out. Analysis of LTP contribution by Nirshilp Securites Pvt Ltd. (Noticee No. 2) (BSE) & (NSE)

 Out of the total sale through 4,185 trades and 3,871 trades on BSE and NSE respectively, Noticee contributed ` 85.15 to positive LTP (31.44% of total market positive LTP, BSE) and ` 85.45 to positive LTP (26.85% of total market positive LTP, NSE) through 258 trades and 335 trades respectively. On analysis of these 258 and 335 positive LTP contributing trades, it was noted that in 198 trades on BSE and 241 trades on NSE, the sell orders were placed before the respective buy orders at higher LTP and for the remaining trades, the sell order were placed after the buy orders. The counter parties to the above mentioned 258 trades and 335 trades were unconnected and scattered.  However, on further analysis of the positive LTP contributing trades of Noticee, it was observed that in 179 out of the 198 positive LTP contributing trades on BSE and in 300 out of the 335 positive LTP contributing trades on NSE, sell orders placed by Noticee was for 1 share. Details of the 258 and 335 positive trades on BSE and NSE are as under : Sl. Description No. of No. of LTP LTP % of % of No. trades trades Contri Contri total total (BSE) (NSE) bution bution market market (Rs) (Rs) positive positive (BSE) (NSE) LTP LTP (BSE) (NSE) 1 Trades where sell order qty is 227 300 73.85 77.65 27.27 24.40 1 share 2 Trades where sell order qty is 30 32 10.40 6.95 3.84 2.18 2 - 10 shares 3 Trades where sell order qty 1 3 0.90 0.85 0.33 0.27 more than 10 shares 4 All sell trades which 258 335 85.15 85.45 31.44 26.85 contributed to positive LTP  As can be seen from the above, from the 258 and 335 sell trades of Noticee on BSE and NSE respectively contributing positive LTP of ` 85.15 and ` 85.45.

For 257 and 332 sell trades, the quantity was in the range of 1-10 shares, during Patch 6 (price rise of the investigation period on BSE and NSE). On analysis of it’s demat statement, it was noted that Noticee was having a holding in the range of 700-800 shares in it’s demat account in the scrip of WYL during this patch of investigation.  It is was observed that Noticee was holding substantial quantity of shares during the period of its respective sale transactions. Despite holding substantial quantity of shares, Noticee released limited number of shares and either placed the sell orders above LTP or matched the buy orders which were above LTP with volume in small quantities as mentioned above. Thus, it is alleged that there was no bona-fide intention on the part of Noticee to sell its holdings, but to mark the price higher than LTP and manipulate the scrip price.  From the trading pattern, it is observed that Noticee was releasing small quantity of shares in each transaction that were above LTP. Out of the 60 trades and 54 trades on BSE and NSE respectively, where the sell order was put after buy order in 40 trades on BSE and 51 trades on NSE, it was observed that in spite of buy order quantity being large, Noticee released small quantity of shares in each transaction which contributed to price rise through positive LTP.  By carrying out such trades Noticee was instrumental in establishing a price higher than the LTP.

By placing sell orders for small quantity of shares for 258 trades on 29 different days and 335 trades on 30 different days, Noticee carried out trades that contributed to price rise by ` 85.15 i.e., 31.44% of market positive LTP on BSE and ` 85.45 i.e. 26.85% of market positive LTP on NSE. In view of the repeated nature of such trades by Noticee, it is alleged that Noticee contributed to increase in price of the scrip.  It is further alleged that Noticee created a misleading appearance of trading in the scrip by such trades with volume in small quantities and price above LTP and with each trade manipulated the scrip price resulting in higher price.  The above pattern was repeated on 589 instances during Patch 6 and thereby contributed to market positive LTP creation of ` 84.25 and ` 84.60 of BSE and NSE respectively. It is alleged that it clearly shows that there was no bona-fide intention on the part of the Noticee to sell the shares, but to mark the price higher than the LTP and manipulate the scrip price. It is further alleged that Noticee had significantly contributed to rise in the scrip price and has created a misleading appearance of trading in the scrip by such 589 manipulative trades. b) In view of the above it is alleged that the Noticee has violated Regulations 3(a),(b),(c),(d) and Regulations 4(1), 4(2)(a) and (e) of PFUTP Regulations. c) The Noticee was advised to show cause as to why suitable actions/directions in terms of Sections 11(1), 11(4) and 11B of SEBI Act should not be initiated against it for the alleged violation of the provisions of PFUTP Regulations.

REPLY & HEARING 6. In response to the SCN, the Noticee vide its letter dated January 4, 2018 requested for additional time till January 31, 2018 to submit a reply to the SCN. Noticee vide its letter dated January 30, 2018 inter alia made the following submissions:  It is erroneous to add up the negative LTP to the positive LTP and arrive at positive LTP of ` 85.15 (31.44% of total market positive LTP, BSE) and ` 85.45 (26.85% of total market positive LTP, NSE) It is submitted that concluding on the basis of gross aggregation is flawed. As the SCN has rightly observed in the table that the net contribution is 8.05% at BSE and 18.40% at NSE. Without admitting that we have contributed to the positive LTP we humbly submit that the basis of assumption presents an incorrect conclusion.  Like any prudent investor we invest to earn maximum gains. Accordingly, placing sell orders at price higher than LTP was in line with the said objective. It was for the buyers to decide whether to purchase shares at the price higher than the LTP at reduced gains. Therefore contribution to positive LTP ought to be related to the buyers only and not sellers.  We most respectfully state and submit that some of the sell orders were placed before the respective buy orders at higher LTP and for the remaining trades, the sell orders were placed after the buy orders in normal course of business pursuant to our arbitrage strategy which is a permissible practice.

 We most humbly state that our trading in the securities is based on NSE BSE Arbitrage Strategy i.e. we were buying various scrips on BSE and selling on NSE and vice versa to take advantage of the price differential.  It is submitted that as there is possibility of price difference between two Exchanges viz. NSE and BSE. We have in place automated system which has more chances of capturing the difference available than the manual traders. Further, in our case, the quantity that we put in order is same as the best bid and ask quantity available in the Exchange i.e. NSE and BSE. The quantity that we input is always less than the available demat stock we are holding. As soon as any trade gets executed on one Exchange say NSE, the automated system squares off the opposite trade in other Exchange say BSE with similar quantity at market rate or "zero rate" which is synonyms to market rate and cancels the remaining pending order.  We state that placing of order is based on the arbitrage difference between two Exchanges. Orders are placed in NSE depending upon the bid and ask price of BSE and vice versa.

If bid and ask price quotes are available than we place an order just below the ask price or above the bid price. If bid and ask price are not available then we place an order to earn a positive difference of 0.35% of the other Exchange. It may also be noted that all these trades were carried out within a very narrow price range and this is the actual essence of arbitrage. We have executed trades with miniscule margins.  It may be appreciated that volatility and liquidity are the essence of arbitrage activities. We traded in the scrip which was listed under ‘B Group’ during the investigation period which signifies good category scrip as per the Exchange categorization. Arbitrage being our primary business we look for arbitrage opportunities in the differences between Exchanges and make arbitrage benefit accordingly which is completely and legally valid. In any event the SCN has not alleged any wrongdoing in the business of arbitrage.  There could never have been any intention from our side to increase the price of WYL, since we are looking at arbitrage profits only and have no interest in the arbitrage trade in terms of rise or decrease in prices.

We have not only sold but also bought and sold shares in WYL during Patch 6 of the investigation under our NSE BSE Arbitrage strategy. Our trades have also resulted in negative LTP. 7. Vide hearing notice dated October 25, 2018, Noticee was granted an opportunity of hearing on November 28, 2018 at SEBI Bhavan, Mumbai. In response to the hearing notice, the Noticee vide its letter dated November 11, 2018 requested to adjourn the scheduled hearing to any dated between December 10, 2018 to December 13, 2018, as November 28, 2018 was the expiry week of derivatives futures and the Noticee had huge positions in the derivatives segment of the Exchange. Noticee’s request was acceded to and the Noticee was granted a final opportunity of hearing on December 12, 2018 at SEBI Bhavan, Mumbai. However, the Noticee was informed vide an email dated December 10, 2018 that due to administrative exigencies, the scheduled hearing was being postponed to December 13, 2018. 8. Noticee vide its Board resolution passed in the meeting held on December 3, 2018 authorised, Mr. Pankaj Shah and Mr. Ashish Jhaveri to represent it before SEBI (hereinafter referred to as “ARs”).

At the time of the hearing the ARs submitted that their trading strategy is arbitrage and their system is fully automated. They look for arbitrage opportunities between Exchanges and try to make some profit. They have employed this trading strategy in over 900 scrips. The ARs submitted extracts of their trade in the scrip demonstrating their trading strategy (NSE- BSE Arbitrage). The ARs further submitted that the entity has executed trades in the scrip at higher then LTP and at lower than LTP, so it cannot be inferred that they wanted to mark the price higher than the LTP in the scrip. The ARs were advised to submit the following documents on or before December 27, 2018: • Approvals for algorithmic trading from both the Exchanges. • To demonstrate arbitrage for all its trades for single shares in the scrip of WYL. • Summary of trading in different scrips where the entity has employed arbitrage trading strategy for the 10 days as mentioned in Table 11 of the SCN. • Demat statement for the period February, 2013 to April, 2013. 9. Pursuant to the hearing, the Noticee vide its letter dated December 24, 2018 made the following additional written submissions: • Noticee submitted the data for arbitrage between NSE and BSE of all the scrips for the illustrative dates selected in the SCN.

The data shows that it has bought and sold shares on NSE and BSE on the same day in 1,210 scrips during the illustrative dates selected from the investigation period, February 22, 2013 to April 29, 2013. • Noticee submitted the corresponding opposite arbitrage trades executed on NSE and BSE of the258 trades and 335 trades executed on BSE and NSE respectively. The details are given with order time, order number, trade time, trade number, terminal ID and Exchange on which it was executed. • Noticee submitted the approval letters received from NSE and BSE by its brokers for the automated trading. • Noticee submitted the demat transaction statements showing deliveries taken and given of all the scrips in which the trading was done by the Noticee for the investigation period, February 22, 2013 to April 29, 2013. • Noticee submitted the demat transaction statement showing deliveries taken and given of the scrip of WYL for the investigation period, February 22, 2013 to April 29, 2013. The statement shows that out of its total holding of 819 shares at the beginning of the investigation period, it has given and taken deliveries many times of more than 100 shares.

For example 190 shares on 25/02/2013, 312 shares on 26/02/2013, 189 shares 12/03/2013, 795 shares on 19/03/2013, 114 shares on 26/03/2013, 151 shares on 01/04/2013, 288 shares on 06/04/2013, 105 shares 15/04/2013, 221 shares on 17/04/2013, 153 shares on 22/04/2013 and 421 shares on 23/04/2013. • Noticee submitted the details of transactions executed by it in the scrip of WYL for the illustrative dates selected in the SCN. The transactions show that there are number of trades executed below as well as above the trade price of the selected trade on BSE of that particular date in the SCN and its corresponding arbitrage trades in NSE. Further more than 6000 trades are executed on BSE and NSE together on the 9 illustrative dates selected in SCN.

• Noticee has executed more than 16,000 trades in the span of two months in the scrip of WYL. It has bought and sold 11,570 shares during the investigation period. FINDINGS & CONSIDERATIONS 10. I have perused the SCN, written submissions and other materials available on record. On perusal of the same, the following issues arise for consideration: (i) Whether the Noticee has manipulated the price in the scrip of WYL and created a misleading appearance of trading in the scrip during the period February 22, 2013 to April 29, 2013? (ii) If answer to issue No. (i) is in affirmative, whether the Noticee has violated the provisions of PFUTP Regulations? (iii) If answer to issue Nos. (ii) is in affirmative, what directions, if any should be issued against the Noticee? 11. Before embarking upon the necessary discussions, I would like to reproduce the relevant provisions of PFUTP Regulations: Regulation 3. Prohibition of certain dealings in securities No person shall directly or indirectly— (a) buy, sell or otherwise deal in securities in a fraudulent manner; (b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made there under; (c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange; (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made there under.

Regulation 4. Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. (2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely:- (a) indulging in an act which creates false or misleading appearance of trading in the securities market; … (e) any act or omission amounting to manipulation of the price of a security; Issue No. 1 - Whether the Noticee has manipulated the price in the scrip of WYL and created a misleading appearance of trading in the scrip during the period February 22, 2013 to April 29, 2013? 12. Noticee has submitted that the trading strategy of the Noticee is NSE-BSE arbitrage. The same is executed through its automated system. Noticee has submitted the approval letters for its algorithmic trading facility from NSE and BSE. Further, the Noticee has done arbitrage trades in the scrip of WYL. Noticee has submitted the corresponding opposite arbitrage trades executed on NSE and BSE of the 258 trades and 335 trades executed on BSE and NSE respectively.

Further, the Noticee has also submitted trade data for 1,210 scrips where it has bought and sold the shares on the same day on NSE-BSE during the investigation period. 13. It is noted from the details submitted by the Noticee of its trading in the scrip that the following is its trade details for the illustrative dates as mentioned in Table 11 of the SCN: Trx Date Buy Qty Buy Amount Sell Qty Sell Amount (`) (`) 13/03/13 146 2449.60 149 2530.95 14/03/13 307 5741.55 304 5748.85 15/03/13 145 2704.75 145 2725.30 18/03/13 805 15079.70 805 15214.75 19/03/13 86 1562.00 86 1572.05 20/03/13 41 723.85 42 751.05 21/03/13 47 838.55 46 834.65 22/03/13 152 2763.00 150 2760.60 25/03/13 148 2656.70 150 2717.95 26/03/13 22 379.25 22 382.75 28/03/13 155 2731.85 155 2751.70 01/04/13 18 331.25 18 332.90 02/04/13 33 604.80 33 611.30 03/04/13 13 230.25 13 232.00 04/04/13 25 433.15 25 437.60 05/04/13 992 19296.25 992 19444.75 08/04/13 83 1592.25 83 1604.95 09/04/13 530 10655.45 530 10743.00 10/04/13 582 12517.85 582 12590.30 11/04/13 59 1327.15 59 1337.60 12/04/13 159 3406.45 159 3429.00

15/04/13 10 227.40 10 228.55 16/04/13 227 4987.75 227 5025.35 17/04/13 23 503.60 23 506.25 18/04/13 1459 33136.30 1459 33309.05 22/04/13 431 9995.20 431 10074.25 23/04/13 78 1912.70 78 1911.75 25/04/13 625 15841.80 625 16006.80

14. From the above table it is noted that the Noticee is buying and selling in the scrip intraday and mostly squaring off its position in the scrip. In some instances, Noticee has taken delivery of shares too. 15. It is further noted from the details of the trades of the Noticee for the alleged 258 trades and 334 trades executed on BSE and NSE respectively in the scrip that the Noticee buys on one Exchange than sells it on the other Exchange with slight variation in price and within a couple of seconds i.e., as soon as the trades get executed on one Exchange, the Noticee squares off the opposite trade in the other Exchange. Illustration for the same is reproduced below: Trx Date Buy Buy Buy Sell Sell Trade Order Order No Order Terminal Exchange / Qty Rate Qty Rate Time Time Date Id Sell 13/03/13 Sell 1 16.60 12:22:57 11:44:52 2013031368603777 13/03/13 30839 NSE

13/03/13 Sell 1 16.65 12:22:57 11:44:49 2013031368603778 13/03/13 30839 NSE

13/03/13 Sell 1 16.90 12:22:57 11:44:31 2013031367702255 13/03/13 30839 NSE

13/03/13 Buy 1 16.45 12:22:59 12:22:59 14000085245799 13/03/13 239 BSE

13/03/13 Buy 2 16.45 12:22:59 12:22:59 14000085305917 13/03/13 218 BSE

13/03/13 Sell 1 17.00 15:12:37 15:12:37 2013031369436187 13/03/13 30839 NSE

13/03/13 Buy 1 17.00 15:12:51 15:12:51 2013031370581006 13/03/13 30839 NSE

13/03/13 Buy 1 17.00 15:19:57 15:19:57 23000064321675 13/03/13 239 BSE

13/03/13 Sell 1 17.25 15:19:58 15:19:58 2013031370579962 13/03/13 30839 NSE

13/03/13 Sell 1 17.95 15:28:04 15:28:00 2013031370802347 13/03/13 32671 NSE

13/03/13 Sell 1 17.95 15:28:05 15:28:00 2013031370802347 13/03/13 32671 NSE

13/03/13 Buy 2 17.55 15:28:08 15:28:08 18000092362215 13/03/13 218 BSE

14/03/13 Sell 1 19.05 13:19:51 13:19:51 2013031469516702 14/03/13 30839 NSE

14/03/13 Buy 1 18.40 13:19:51 13:19:51 21000109241515 14/03/13 239 BSE

14/03/13 Buy 1 19.00 13:23:30 13:23:30 21000109245719 14/03/13 239 BSE

14/03/13 Sell 1 19.40 13:23:56 13:23:55 2013031469546230 14/03/13 30839 NSE

14/03/13 Sell 1 18.50 13:38:23 13:38:23 2013031469546229 14/03/13 30839 NSE

14/03/13 Sell 1 18.85 13:38:23 13:38:21 2013031469673438 14/03/13 32671 NSE

14/03/13 Buy 1 18.40 13:38:24 13:38:24 21000109263563 14/03/13 239 BSE

14/03/13 Buy 1 18.40 13:38:24 13:38:24 21000109245751 14/03/13 239 BSE

14/03/13 Sell 1 19.05 13:38:25 13:38:25 2013031469679079 14/03/13 30839 NSE

14/03/13 Buy 1 18.70 13:38:26 13:38:26 19000141062120 14/03/13 239 BSE

14/03/13 Sell 1 19.55 13:38:36 13:38:32 2013031469679841 14/03/13 30839 NSE

14/03/13 Buy 1 19.15 13:38:36 13:38:36 21000109263660 14/03/13 239 BSE

14/03/13 Sell 1 19.20 14:17:35 14:17:34 2013031469679490 14/03/13 32671 NSE

14/03/13 Buy 1 19.00 14:17:36 14:17:36 21000109309238 14/03/13 239 BSE

14/03/13 Sell 1 19.25 14:17:39 14:17:38 2013031470065639 14/03/13 32671 NSE

14/03/13 Buy 1 19.00 14:17:42 14:17:42 20000119379126 14/03/13 218 BSE

14/03/13 Sell 1 19.15 14:17:47 14:17:45 2013031470066394 14/03/13 32671 NSE

14/03/13 Buy 1 19.00 14:17:48 14:17:48 20000119379304 14/03/13 218 BSE

14/03/13 Sell 1 19.25 14:17:52 14:17:50 2013031470067791 14/03/13 32671 NSE

14/03/13 Buy 1 19.15 14:17:52 14:17:52 21000109309503 14/03/13 239 BSE

14/03/13 Sell 1 19.45 14:23:12 14:22:41 2013031470120521 14/03/13 30839 NSE

14/03/13 Buy 1 19.40 14:23:12 14:23:12 21000109314018 14/03/13 239 BSE

14/03/13 Sell 1 19.70 14:24:14 14:23:57 2013031470132823 14/03/13 30839 NSE

14/03/13 Buy 1 19.40 14:24:15 14:24:14 14000134003658 14/03/13 239 BSE

14/03/13 Sell 1 19.80 14:24:20 14:24:20 2013031470137840 14/03/13 32671 NSE

14/03/13 Sell 1 19.85 14:24:20 14:24:18 2013031470136906 14/03/13 30839 NSE

14/03/13 Buy 1 19.40 14:24:21 14:24:21 21000109315280 14/03/13 239 BSE

14/03/13 Buy 1 19.40 14:24:22 14:24:22 20000119387782 14/03/13 218 BSE

14/03/13 Sell 1 19.50 14:25:34 14:25:33 2013031470138140 14/03/13 30839 NSE

14/03/13 Sell 1 19.65 14:25:37 14:25:37 2013031470148012 14/03/13 32671 NSE

14/03/13 Sell 1 19.70 14:25:37 14:25:35 2013031470150921 14/03/13 30839 NSE

14/03/13 Buy 1 19.40 14:25:39 14:25:39 21000109316491 14/03/13 239 BSE

14/03/13 Sell 1 19.75 14:25:42 14:25:40 2013031470151767 14/03/13 30839 NSE

14/03/13 Buy 1 19.40 14:25:42 14:25:42 20000119389553 14/03/13 218 BSE

14/03/13 Buy 1 19.40 14:25:42 14:25:42 19000141076062 14/03/13 239 BSE

14/03/13 Buy 1 19.40 14:25:43 14:25:43 21000109316604 14/03/13 239 BSE

14/03/13 Sell 1 19.15 14:26:56 14:26:55 2013031470153255 14/03/13 30839 NSE

14/03/13 Buy 1 19.30 14:26:56 14:26:56 21000109317036 14/03/13 239 BSE

15/03/13 Buy 1 18.40 11:05:17 11:05:17 16000084047283 15/03/13 239 BSE

15/03/13 Sell 1 18.50 11:05:18 11:05:18 2013031567078551 15/03/13 30839 NSE

15/03/13 Sell 1 19.40 11:22:01 11:21:58 2013031568295016 15/03/13 30839 NSE

15/03/13 Buy 1 19.35 11:22:01 11:22:01 16000084161808 15/03/13 239 BSE

15/03/13 Sell 1 18.90 14:54:46 14:54:45 2013031569935048 15/03/13 32671 NSE

15/03/13 Buy 1 18.55 14:54:49 14:54:49 17000092328954 15/03/13 218 BSE

15/03/13 Sell 1 19.10 14:55:27 14:55:07 2013031570715163 15/03/13 30839 NSE

15/03/13 Buy 1 18.95 14:55:27 14:55:27 23000064274919 15/03/13 239 BSE

15/03/13 Sell 1 19.15 14:55:57 14:55:38 2013031570723895 15/03/13 32671 NSE

15/03/13 Buy 1 19.15 14:55:57 14:55:57 2013031570729743 15/03/13 32671 NSE

15/03/13 Sell 5 19.60 14:56:22 14:56:22 2013031570734250 15/03/13 32671 NSE

15/03/13 Buy 5 19.40 14:56:22 14:56:22 17000092330677 15/03/13 218 BSE

15/03/13 Buy 1 19.40 14:56:28 14:56:28 23000064275504 15/03/13 239 BSE

15/03/13 Sell 1 19.40 14:56:50 14:56:38 2013031570736770 15/03/13 30839 NSE

15/03/13 Sell 5 19.60 14:56:50 14:56:47 2013031570736645 15/03/13 32671 NSE

15/03/13 Buy 5 19.40 14:56:51 14:56:51 17000092331074 15/03/13 218 BSE

15/03/13 Sell 1 19.40 14:58:11 14:58:11 2013031570755998 15/03/13 32671 NSE

15/03/13 Buy 1 19.40 14:58:12 14:58:12 17000092332445 15/03/13 218 BSE

15/03/13 Buy 1 19.00 15:02:56 15:02:56 23000064282473 15/03/13 239 BSE

15/03/13 Sell 1 19.40 15:02:58 15:02:58 2013031570832046 15/03/13 30839 NSE

15/03/13 Sell 1 19.40 15:03:24 15:03:01 2013031570832842 15/03/13 30839 NSE

15/03/13 Buy 1 19.35 15:03:27 15:03:27 23000064282509 15/03/13 239 BSE

15/03/13 Sell 1 19.20 15:08:03 15:08:03 2013031570840866 15/03/13 30839 NSE

15/03/13 Buy 1 19.00 15:08:04 15:08:04 23000064282883 15/03/13 239 BSE

15/03/13 Sell 1 19.10 15:22:16 15:22:11 2013031570930118 15/03/13 30839 NSE

15/03/13 Buy 1 19.00 15:22:17 15:22:17 23000064287553 15/03/13 239 BSE

16. The above table demonstrates the trading strategy of the Noticee i.e., NSE-BSE arbitrage executed through its automated system for which the Noticee has taken requisite approval from the Exchanges. With respect to execution of miniscule quantity of sell orders, the submission of the Noticee that the quantity it puts in the order is same as the best bid and ask quantity available in the Exchange is acceptable. An arbitrageur profits from the imbalance in price on different Exchanges. So in order to profit, the arbitrageur buys at a lower price in one Exchange and sell at a higher price on the other Exchange. Moreover the quantity and price at which an arbitrageur buys / sells a scrip depends on a host of market forces at play at the relevant time, including other traders in the scrip. Therefore, a trader who has adopted its trading strategy as arbitrage, in the extant matter executed through algorithmic trading, will not have complete control over the trades being executed apart from the pre-defined parameters that it has already set in its algorithm. 17. Arbitrage as a trading strategy is permissible within the confines of securities laws and so long the particulars of the said trading strategy are as per the extant laws, no fault can be found with the said trading strategy.

In light of the same, it is held that the sell orders executed by the Noticee for miniscule quantity in the scrip are not manipulative in nature. 18. I note that in cases of market manipulation, admittedly, no direct evidence would be forthcoming / available. Manipulative transactions are to be tested on the conduct of parties and abnormality of practices which defy normal logic and laid down procedures. What is needed, is to prove that in a factual matrix, preponderance of probabilities indicate a fraud. In this regard, the observations of Hon’ble Supreme Court of India in SEBI Vs. Kishore R Ajmera et.al. decided on February 23, 2016 wherein the Hon’ble Court while deciding the matter under SEBI Act and PFUTP Regulations where there was no direct evidence forthcoming, observed as follows: “It is a fundamental principle of law that proof of an allegation levelled against a person may be in the form of direct substantive evidence or, as in many cases, such proof may have to be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/charges made and levelled.

While direct evidence is a more certain basis to come to a conclusion, yet, in the absence thereof the Courts cannot be helpless. It is the judicial duty to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded and to reach what would appear to the Court to be a reasonable conclusion therefrom. The test would always be that what inferential process that a reasonable/prudent man would adopt to arrive at a conclusion…” 19. The Noticee has submitted data of its trading in 1,210 other scrips during the investigation period reflecting its similar trading strategy of arbitrage in the said scrips. The data shows the particulars of shares bought and sold on a given day at both the Exchanges. Thus, it can be said that doing arbitrage trading is in the normal course of business of the Noticee. The same pattern was followed by the Noticee in the scrip of WYL. Hence, the trading behavior of the Noticee in other scrips also justifies its trading in WYL which has already been held to be not manipulative in nature. 20. In view of the above, the findings that have been gathered from various circumstances for instance the particulars of the buy and sell orders, mode and manner of execution of trades, trading strategy adopted by the Noticee and the trading behavior in other scrips, the totality of the picture that emerges warrants that the Noticee be given a benefit of doubt.

Therefore, I am of the considered view that the Noticee has not manipulated the price in the scrip of WYL and has not created a misleading appearance of trading in the scrip during the period February 22, 2013 to April 29, 2013. 21. In view of the aforesaid finding, issues no. 2 and 3 does not require any consideration. ORDER 22. In the facts and circumstances of the case, I, in exercise of the powers conferred upon me in terms of Section 19 of the Securities and Exchange Board of India Act, 1992, hereby dispose of the show cause notice dated December 15, 2017 served on Nirshilp Securities Pvt. Ltd. (PAN: AABCN4361M) without any directions.

23. The order shall come into force with immediate effect.

-Sd- DATE: February 5, 2019 MADHABI PURI BUCH PLACE: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA