DABBA TRADING

Why in News?:

Recently, National Stock Exchange (NSE) issued a string of notices naming entities involved in “dabba trading”.

What is Dabba Trading?

About:

Dabba trading is a form of informal trading that takes place outside the purview of the stock exchanges.

In this practice, traders bet on stock price movements without incurring a real transaction to take physical ownership of a particular stock as is done in an exchange.

This results in gambling centred around stock price movements, which is illegal and unregulated.

For example, an investor places a bet on a stock at a price point, say ?1,000. If the price point rose to ?1,500, he/she would make a gain of ?500. However, if the price point falls to ?900, the investor would have to pay the difference to the dabba broker.

Thus, it could be concluded that the broker’s profit equates the investor’s loss and vice-versa. The equations are particularly consequential during bull runs or bear market.

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