The trading through dabba is one kind of off-exchange trading when buy or sell orders are not made via the recognized stock exchange but within the trading process of the operator. As this trading is not done via the recognized exchange, it is not covered by the securities market regulation of India. The Securities Exchange Board of India (SEBI) clearly states that dabba trading is illegal and not regulated in India.
What Is Dabba Trading?
In other words, it is the practice of betting on the future price movements of shares and other products of the market without the execution of the transaction on the recognized stock exchange. The operator makes all necessary records and calculates the profit or loss.
For instance, if the trader believes in the growth of the stock price, the operator makes a buy position for the trader. In case of the increase, the trader gets profit based on the difference in the price. But, in case of the decrease, the trader pays the loss.
Thus, the execution of the actual order via the recognized stock exchange is not included into the process of trading. That is why this trading is called illegal.
What Is Dabba Trading ID?
The Dabba Trading ID is offered by the unregistered operator for the usage of an online trading platform. Such ID looks like a regular trading account, but there is a crucial difference between the accounts in the fact whether the trades are really made via the recognized exchange and via the registered intermediary.
Trading ID alone does not mean the legitimacy of the activities of the investor. Investors should check whether the intermediary is registered with SEBI before opening an account or depositing money. SEBI warns investors against the usage of the unregistered intermediaries.
What Is Dabba Trading App?
The Dabba Trading App may seem to be a regular trading or financial app. It provides market prices, trading screen, balance of the account and other features.
But the presence of an app is not enough to make sure about its authorization. SEBI warns investors against the unregistered web applications and platforms advising people to make trading activities only with the help of the registered intermediaries.
Thus, people should not download any app just because of its attractive offers on the quick profits or low commission.
What Is a Dabba Trading Website?
It may offer online trading services and information on accounts, market price, and trading facility. But, the investors need to keep in mind that a professional-looking website doesn’t necessarily mean it is a regulated service.
Before using the website for trading purposes, you need to check the registration status of the broker or intermediary. Also, check if the trades result in proper exchange records and contract notes.
Website of dabba trading is dabbatrading.ai. It is presented as an online trading platform and mentions about trading services and financial advice. But, the website’s content should not be considered as proof of SEBI registration or legal permission. Investors need to find out about their regulatory status before making investment decisions.
Why Is Dabba Trading Illegal in India?
The primary reason behind this is that trades are made outside the recognised stock exchange network. According to SEBI, these transactions are internalised by the operator and are beyond the purview of stock exchanges and other regulatory authorities.
Some of the risks involved are as follows:
- No regular investor protection: Investor protection and grievance redressal mechanism at the stock exchanges may not be available.
- Counterparty risk: Operator may not pay profits or refund money.
- No official trade record: Trades may not have the same records as trades done in the exchange.
- Fraud: Operator can be unregistered and thus can pose a financial risk.
- Legal action: Organising, facilitating, and participating in dabba trading may lead to penalty under relevant law. As per NSE, investors need to avoid dabba trading.
- How Can Traders Be Safe?
Investors should always use recognised stock exchanges and SEBI-registered intermediaries. Before opening an account, make sure to verify all the details of the broker and understand the charges, risks and terms of trading.
Do not believe in the promises of guaranteed returns. Never share your passwords, OTP, and any other sensitive information with anyone. Investors should also be careful about social media and WhatsApp trading applications.
Concluding Remarks
It might look appealing to engage in Dabba Trading since some players advertise themselves as offering fast deals and cheap prices or large gains. Nevertheless, it would be crucial to become aware of all risks prior to taking any steps.
Dabba Trading does not equate with the proper stock market trading. It would be best to employ the exchange system and to act on legitimate information.
Dabba Trading’s website cannot be taken as a financial service unless its regulatory status is proved.
