India's SEBI Alleges Insider Trading in Energy Exchange Options

India's market regulator, SEBI, alleges insider trading in Indian Energy Exchange Ltd. shares, citing well-timed trades and communications suggesting the sharing of unpublished information. The regulator found "ill-gotten gains" of 1.73 billion rupees ($20 million) and has barred the entities from trading and frozen alleged illicit gains. This is part of a wider crackdown on insider trading in India's equity options market.

India's market regulator, the Securities and Exchange Board of India (SEBI), has alleged insider trading in the shares of Indian Energy Exchange Ltd. (IEX), marking a significant development in the regulator's ongoing crackdown on insider trading in India's equity options market. The regulator has cited well-timed trades and communications that suggested the sharing of unpublished information, leading to "ill-gotten gains" of 1.73 billion rupees ($20 million).

In its interim order, SEBI found that several entities built positions in IEX bearish options ahead of the Central Electricity Regulatory Commission's July 23 decision, which was seen as a threat to the company's dominant position in India's short-term electricity market. The regulator alleges that these entities received confidential updates about upcoming regulatory developments, including a market-coupling framework intended to centralize price discovery across power exchanges. The connected traders profited significantly from the subsequent plunge in IEX shares, with the largest gain of about 720 million rupees attributed to Bhoovan Singh, who was connected to Yogeita S. Mehra, chief of CERC’s economic division.

SEBI has barred the entities from trading and frozen the alleged illicit gains pending the completion of the investigation. The regulator has also indicated that it may attach bank accounts or assets linked to the trades to prevent the diversion of funds.

This latest move by SEBI underscores the intensifying enforcement around derivatives activity in the world's largest equity options market by contracts traded. Earlier this year, the regulator fined individuals for trades in software giant Infosys Ltd. shares and issued one of its largest orders in a long-running case involving former stockbroker Ketan Parekh. The crackdown on insider trading is part of SEBI's broader efforts to maintain market integrity and protect investors.