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Dabba Trading

There are many legitimate ways to invest in the stock market. For example, you can download a brokerage app on your phone and open a demat account and invest directly in the market. Through the app itself you can trade in stocks, mutual funds, ETFs and F&O. Apart from these methods, there are some methods which work only on paper. Market regulator SEBI does not have access to them and trading of stocks is done in cash. One of these methods is Dabba Trading. Let us tell you in detail about Dabba trading in this news and how it happens. What are the risks?

Dabba trading is also called box trading or bucket trading. This type of trading is an illegal practice outside the official stock exchanges. The word 'Dabba' means 'box' in Hindi and refers to this type of unregulated and hidden business. In this, traders and brokers place bets on the fluctuations in share prices, but do not actually buy or sell shares. These deals do not take place on any official SEBI-recognized stock exchange. In recent times, it is being used extensively for purchasing silver and gold.

The Dabba operator settles the transactions at his own level, due to which these transactions remain out of stock exchange and government monitoring. Since these deals are not done on the official platform, investors do not get the benefit of the grievance redressal system provided by the stock exchange. In simple language, Dabba trading is like gambling based on fluctuations in share prices.

How does Dabba Trading work?

In Dabba trading, brokers act as intermediaries between traders. They find buyers and sellers interested in the same stock in the Dabba Bazaar. Connect them and get the deal done. In return they get commission, which is a part of the deal price. In this, sometimes he writes on paper and sometimes works on a virtual platform, so that the trading experience remains real.

Example: Suppose trader A wants to buy 50 shares of XYZ Limited in the Dabba market for Rs 200. He places the order with the broker, who then finds a seller who is willing to sell the same share for Rs 200. Once the deal is completed, the broker takes commission based on the deal price.

Another method in the Dabba market is to speculate on changes in prices. Traders estimate how much the price of a stock will rise or fall and on that basis place bets with the broker. If the price increases as expected then the trader benefits and if it does not increase then the broker benefits. For example – Trader B can bet that the share of ABC Limited will increase from Rs 300 to Rs 350 in a week. If the price reaches $350, Trader B will make profit. If the price falls to Rs 250, he will incur a loss and the broker will earn from his loss.

Risks of Dabba Trading

The increasing presence of online Dabba trading apps attracts many new investors towards these illegal methods. There are many big risks associated with this.

1. There is a high risk of losing money in Dabba trading because things like cheating, showing wrong prices and changing deals arbitrarily can easily happen.
2. Since it operates outside the official system, investors have no way of seeking legal help in case of any disputes or fraud.
3. Involvement in this may result in fine, punishment or even criminal action from the authorities, as it is against the law in many places.

Overall, Dabba trading is a dangerous practice, which damages the credibility of the financial markets and puts investors at risk. Traders and investors should stay away from such activities and always use legitimate and regulated trading platforms.