SEBI Cracks Down on Alleged Insider Trading in IEX Stock: Market Coupling Order at the Core

Noticees collectively generated an amount of alleged ill-gotten gains totaling over ₹172 crore from these trades

The Securities and Exchange Board of India (SEBI) has issued an Ex-Parte Interim Order against several individuals for a prima facie case of insider trading in the shares of Indian Energy Exchange Limited (IEX). The market regulator’s preliminary investigation alleges that the individuals used privileged, non-public information related to a crucial regulatory decision to make substantial profits, highlighting the persistent threat of information asymmetry in the financial markets.

The Unpublished Price Sensitive Information (UPSI)

The core of the case revolves around an announcement by the Central Electricity Regulatory Commission (CERC) on July 23, 2025, regarding the implementation of ‘Market Coupling’.

– What is Market Coupling? It involves the centralized matching of bids from various power exchanges to create a uniform market clearing price.

– The Impact: IEX is the dominant power exchange in India. SEBI observed that the implementation of market coupling was expected to negatively affect IEX’s trading volume and its control over price discovery. This made the CERC decision a piece of Unpublished Price Sensitive Information (UPSI).

– Market Reaction: Once the CERC order was made public after market hours on July 23, 2025, the IEX share price experienced a dramatic drop of 29.58% on the following trading day, July 24, 2025.

Alleged Modus Operandi: Information Leakage and Strategic Trading

SEBI’s investigation, which included a search and seizure operation, revealed a network of connections and a distinct trading pattern among the eight named ‘Noticees’.

1. The Leak: The investigation suggests that two of the Noticees, Bhoovan Singh and Sanjeev Kumar, played pivotal roles in obtaining and disseminating the UPSI. The information, including internal CERC documents and minutes of meetings, was allegedly sourced from a CERC official, referred to as ‘Official 1’ (O1), who was part of the Economics Division from where the CERC order originated.

2. Dissemination: Internal documents and confidential information were reportedly shared by Bhoovan Singh with other Noticees via a private WhatsApp group. The information flow between the CERC official and Bhoovan Singh was frequent, even continuing during the search and seizure operation.

3. The Trades: The Noticees had little to no trading history in the IEX scrip during the preceding months. However, immediately before the CERC announcement, the Noticees took huge positions in Put Options of IEX, which are contracts that gain value when the stock price falls. This change in trading behavior indicated prior knowledge of the impending price crash.

4. Account Access: Evidence indicated that Bhoovan Singh was operating the trading accounts of his father, mother, and another relative. Similarly, Sanjeev Kumar allegedly placed orders in his wife’s trading account.

Regulatory Action and Ill-Gotten Gains

SEBI’s order highlights that the Noticees collectively generated an amount of alleged ill-gotten gains totaling over ₹172 crore from these trades.

Based on the prima facie evidence of having access to and trading on UPSI, SEBI concluded that the Noticees violated the provisions of the SEBI Act, 1992, and the SEBI (Prohibition of Insider Trading) Regulations, 2015.

As a result, SEBI has passed this Ex-Parte Interim Order to take immediate action, which is necessary to:

Prevent the alleged ill-gotten gains from being transferred beyond the reach of the regulator.
Protect the integrity of the securities market, as such actions create information imbalances that harm innocent investors.
The interim order is an initial step, and the investigation into the matter is ongoing.

Click here to download SEBI’s order IN THE MATTER OF INSIDER TRADING BY CERTAIN ENTITIES IN THE SCRIP OF INDIAN ENERGY EXCHANGE LIMITED