Explained: How dabba transactions bypass SEBI rules

What is dabba trading?
In this from of trade, transactions – orders of clients to buy or sell shares — are not routed through the official exchange platform. It is just recorded in the book or register maintained by the dabba operator. Settlement for payment is done on weekly basis.

Here's how dabba transactions bypass SEBI rules for share trading:

1. Client calls to buy or sell to the operator, who gives him quote from live feeds that he receives from his computer

2. Upon confirmation from client, operator registers the trade. All trades are noted in a book, register or a laptop

3. Transactions settled at the end of weekly cycle in cash

Is it illegal in India?
In India, the Securities Contract Regulation Act permits securities transactions only through stock exchanges. Hence, dabba trading is illegal.

Who participates in dabba trading?
Any individual can participate in dabba trading. The only requirement is access to someone who knows a dabba operator. A personal introduction on the credentials of the client is a precondition to get into the inner circle of dabba trade.