NSE issues investor advisory against 'dabba', illegal trading services: What it means

National Stock Exchange of India Ltd (NSE) has recently issued investor caution advisories against two entities, namely Legendry Traders and Let's Trade India, for allegedly engaging in prohibited activities through various digital platforms.

"Legendry Traders, operating through a Telegram channel, is allegedly providing securities market tips and offering account handling services to investors," the country's largest exchange stated.

"Additionally, Let's Trade India, operating through its Telegram, Instagram and YouTube channels, along with associated websites and mobile number 9773687281, is allegedly facilitating dabba/illegal trading services. A police complaint has also been lodged in this matter," NSE added.

The bourse advised investors to remain cautious and not subscribe to any scheme or product offered by any person or entity promising indicative, assured or guaranteed returns in the stock market, as such activities are prohibited by law. Investors are further advised not to share their trading credentials, including User IDs and Passwords, with anyone, NSE also said.

"It may be noted that the above-mentioned entities are not registered either as members or Authorised Persons of any registered member of NSE. Investors are encouraged to verify the credentials of registered stock brokers and their Authorised Persons through the "Know/Locate Your Stock Broker" facility available on the NSE website before dealing with any person or entity," it further stated.

What is 'dabba' trading

NSE noted that 'dabba' trading is an illegal and unregulated form of trading in securities. In such trading, traders place deals in securities without the trades actually being executed on any official Sebi-recognised stock exchange.

These trades are settled internally by the 'dabba' operator and are outside the purview of stock exchanges and regulatory bodies.

Since trades are not executed on official stock exchange platforms, investors can not avail a grievance redressal mechanism of stock exchanges.

A 'dabba' trade offers no benefits of safe and guaranteed trades. Therefore, investors should exercise caution.

In a separate development, NSE has filed its draft red herring prospectus (DRHP) with Sebi for its proposed initial public offering (IPO). The DRHP highlighted the exchange's technology infrastructure, investor reach, non-trading businesses and financial performance.