Amidst a volatile stock market and upcoming tighter guidelines in the derivatives market, dabba trading—an illegal and unregulated form of trading outside recognized exchanges—has seen a significant resurgence. Experts evaluate that dabba trading volumes now touch Rs 100 lakh crore per day, which is roughly 20% of the daily turnover in the Futures and Options (F&O) segment. This surge echoes the rapid growth of dabba trading in the 1990s and early 2000s, when its volumes accounted for nearly one-third of the total market activity.
The Resurgence of Dabba Trading: Risks, Appeal, and Regulatory Warnings
Regulatory authorities are sounding the alarm over the resurgence of dabba trading, highlighting the significant risks it poses to investors. As dabba trading operates outside official recognition, investors have no means to seek redress if losses occur. Despite being illegal, dabba trading continues to attract participants due to its low entry barriers, such as no margin requirements, minimal paperwork, and the absence of taxes or fees. Additionally, the anonymity and flexibility it offers further appeal to traders.
Experts predict that the new F&O guidelines will likely reduce trading volumes by 40%, but many speculators are already shifting to dabba trading and other alternative markets, such as commodities and gaming platforms. While the risks of dabba trading are widely acknowledged—traders face the possibility of losing their entire investment with no recourse—its appeal lies in the potential for quick profits. As one expert noted, “If a dabba trader incurs heavy losses, there’s no way to recover the money.”
Dabba Trading: Unregulated Bets and the Legal Risks Involved
Brokers facilitate transactions by matching buyers and sellers of similar volumes in exchange for a commission, enabling traders to speculate on price movements without making actual investments. The absence of regulation in dabba trading allows traders to engage in bets that exceed the limits set by legitimate exchanges.
Regulatory bodies, including Sebi, persist in advising investors to avoid dabba trading, emphasizing that it is illegal under the Securities Contracts (Regulation) Act of 1956. Violators face severe penalties, including fines and imprisonment.
