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By Naveen Shah
Dabba is a trade where brokers and speculators illegally bet in commodities to make quick bucks. Dabba trades are dealings which happen outside ..
19 Oct 2007
Commodity Online Special
Now, another threat to commodity and equity market is dabba trading. In India, Gujarat and Uttar Pradesh are two main centres for dabba trade. As if dabba trading in stocks and commodities was not enough, punters in Rajkot and other part of Saurashtra have even started foreign currency trading. Foreign currencies such as the Euro, pound, yen and Australian dollar have become the hot favourites of this market which has a daily turnover of Rs 100 crore.

Dabba is a trade where brokers and speculators illegally bet in commodities to make quick bucks. This is a practice mushrooming in several tier-II towns like Rajkot, Vadodara, Jaipur, Jalgaon, Ludhiana along with metros like Kolkata, Mumbai and Delhi. Dabba trades are dealings which happen outside the exchange. Here, punters use the exchange traded prices as the reference quote to take bets.

The transaction are neither routed through the exchange nor reported while settlements take place in cash outside the bourse. Understandably, the risk of default is high with no one to assume the counterparty risk. But such trades often thrive as extremely low margins allow high leveraging. Functioning as a near parallel to the exchange, dabba (or bucket shops) also stick to the lot sizes of contracts traded in the exchange.

The Indian dabba trade is a variation of the American bucket shop operations of the 1920s, which were known to have mafia links. In India, a sizeable number of brokers and sub-agents were found to have links with the underworld. All these trades are violative of Sections 15,18,20,21 and 21A of the Forward Contracts (Regulation) Act, 1952.

In a recent incident, a dabba trade racket in menthe oil was busted at Chandausi in Uttar Pradesh. In fact, the unofficial dabba trade in Chandausi is believed to have driven away mentha volumes, by as much as 80% since last year, from two of the online national exchanges — MCX and NCDEX.

Trades have also been reported from other mentha growing areas in UP like Sambhal and Rampur. Mentha oil has always been a speculators’ delight and in the past even some big stock market players have played the Futures on the official exchanges. Despite the risks, dabba trades are generating volumes of three to four times the combined turnover in both the exchanges.


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COMMENTS (3)
Bharat
05 Feb 2014
mcx tips
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Kapil biyani
12 May 2011
usd inr can touch level 46 or above
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Ritesh
12 Nov 2010
dabba trading
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