The "Dabba" means box and in modern context, a computer. A Dabba operator in the securities market's parlance is the trader/operator who executes "Dabba Transactions". His office is the replica of any broker office having number of customers executing the trade on the terminals linked to the exchange showing market rates/trades. Earlier, the dabba trading do not execute the investor's trades on the stock exchange system but in the dabba operator's books only. A dabba operator acts as a principal to all the trades and not as an agent of the client. He is a counter party to the trades, whereas, he should be the Clearing Corporation who guarantees trades on the BOLT/NEAT system. This kind of operation, where trade is kept within the books of the operator is called "dabba" in the popular market terms. But now, the NSE & BSE has provided the facility for the investors to verify their trades on the NSE/BSE websites. This facility has made the broker vulnerable to be exposed to the investor's and can made him liable for civil & criminal remedy. In order to encounter such situation and to deceive the educated investors, the fraudster persons have developed novel and sophsicated mechanism of online dabba trading which even take care of all exchange procedures and rules and difficult to detect.
ONLINE DABBA TRADING :-
This fraudulent practice is prevalent only in the F&O segments because the exchanges allows the modification of client codes in the F&O segments by the brokers at their choice without any security mechanism or supervision by the exchanges. The client places an order for buy or sells position on the exchange in the F&O segments. The trades is executed on the exchange and reported to the client. Within few second, the broker execute the reverse transaction where by the position of the client on the exchange becomes nil. Then the broker changes the client code of the reverse transaction into a different client code and thus the contract note is generated for the transaction done by the client only and even if the investor verify the transaction on the exchange, it will not show the reverse transaction in his client code as the client code has already been changed. Subsequently, when the client squares the transaction, the similar reverse transaction is executed and client code is changed. Thus, as the net position on both the dates of buying and selling is nil, the ultimate profit or loss accrued to the client vis--vis broker only. Normally, in such cases, the broker will not issue the contract notes and will report the transactions manually. Some will provide only the MTM bills that too just computer output on the plain paper without any stamp/letterhead so that these can not be used as evidence against them. The main risk to the investor is whenever, the broker suffer heavy losses due to risk they undertake due to dabba trading, they are likely to dispute the transactions or abscond. Most of the brokers who had absconded in last three years are due to losses suffered due to such frauds. Some of the fraudster have developed the software whereby , the moment transaction is executed in the client account, an automatic reverse transaction is executed so that these manipulation can be done at the large level because manually it required a number of people.
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