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Dabba Trading lacks government oversight, offering no legal protection. Operators can manipulate prices, putting investors at high risk of fraud, loss, and zero recourse
If an operator absconds or declares a loss, dabba traders have no legal protection. (Representative/Shutterstock)
As more young and first-time investors turn to the stock market in hopes of quick profits, a parallel trend is raising concern. An increasing number are getting lured into illegal ‘Dabba Trading’, bypassing official channels to make fast, risky money.
What Is Dabba Trading?
Dabba Trading, also known as ‘Box Trading’ or ‘Bucket Trading’ in English, involves trading outside the stock market without regulation.
In Dabba Trading, there is no actual purchase or sale of stocks; only speculation on their prices occurs. This system operates outside any SEBI-recognised stock exchange, making it completely illegal.
A ‘Dabba Operator’ facilitates transactions between traders and settles all profit/loss accounts independently. Deals are conducted in cash, which not only saves tax but also involves black money.
How Does Dabba Trading Work?
For instance, if someone wants to buy 50 shares of XYZ company at Rs 200, they make this deal with a dabba operator who finds a seller secretly. If the share price increases, the customer profits; if it decreases, the loss is theirs.
Another approach is speculating on price movements. For example, if one believes ABC company shares will rise from Rs 300 to Rs 350 and this occurs, they benefit, otherwise, they incur a loss.
What Makes Dabba Trading Risky For Investors?
The risks in Dabba Trading are significant as the entire process lacks government oversight, providing no legal recourse for complaints. Dabba operators can manipulate prices, risking common investors being cheated.
If an operator absconds or declares a loss, investors have no legal protection. Legally, Dabba Trading is a crime under Section 23(1) of SCRA, with penalties including up to 10 years in jail and a fine up to Rs 25 crore.
Avoid Dabba Trading, Invest Legally
It is wise to avoid dabba trading and invest in the stock market only with proper information using registered platforms. Sustainable profits come from following legal and right paths.
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