When Beginners start investing, share market is the significant investing option for them. However, they mostly remain confused and thinks what is Dabba trading? Let’s start by figure out everything about it.
Dabba trading (bucketing) has become more common now a days. Dabba Trading is also popular as “bucketing” or “box trading,” as they are kind of dabba trading.
Table of Contents
Introduction
Even in corona period, the sensex and nifty are regularly hitting new levels these days. Due to this, many people to Start participating in the share market in order to gain some profit. However, investors must open a Demat account with a brokerage in order to trade in the financial markets.
The Traders, on the other hand, frequently use a different strategy of bucketing to execute stock market transactions.
It looks interesting for for a stock market beginner. So let’s explore the Bucketing.
What is Dabba Trading?
Dabba trading is a proxy unauthorized market with its own trading laws and legislation. Moreover, volatility in the equity market’s cost of stocks and commodities trigger the Dabba Trading.
To describe it another words, Bucketing is a secret unofficial stock exchange. Livemint has reported story “The inside story of Sebi crackdown on dabba trading” regarding it 0n 11 Jan 2019.
Now, let’s understand how it functions?
How Dabba Trading Functions?
Bucketing is a system by which a dealer guide a customer to trade outside of a securities market. Bucketing serves as an operator who operates outside of the regular market zones. in regular market, Investors put orders with brokers and the order occurs in a demat account.
Whereas, in the scenario of Bucketing, the customer, on the other hand, puts the order with the operator. The operator reports the request in his journal or register after receiving the order.
In fact, for the exchange, the operator collects funds from the customer. This transaction takes place outside of the market, with the operator acting as the Stock market for this trade.
Risk
In the case of bucketing, the operator is responsible for both rewards and losses. When it comes to Bucketing, the operator assumes that a few customers will lose funds and others will gain.
Bucketing, as an unlawful trade includes counter-party threat and investigation by the relevant agencies like Sebi. Let’s look at an example of dabba trading to get a clear understanding of it.
Bucketing carries the possibility of forcing the operator to close his business if he continues to lose money.
Due to this, there’s a great chance that he’ll escape with whatever funds he has. As an outcome, the trader will have bear significant losses.
Example
Let’s assume a trader buys a nifty call option with lot size of 50 at INR 100. In this scenario, the trader shall give INR 5000 to the operator. If the nifty drops, the trader will sell at INR 80 call option he acquired initially.
As a result, the operator will refund INR 1000 to the investor. In this case, the operator’s gain is 5000 – 4000 = INR 1000.
Box Trading at MCX
Dabba traders are active in both markets of equity and commodity. The shares are linked to the Indian equity market. Commodity trading, on the other hand, is dependent on the trading of the Multi Commodity Exchange, or MCX.
The Multi Commodity Exchange (MCX) is a commercial market for a variety of commodities. The operators take a small commission from the traders and trade a variety of commodities offered on the MCX.
Dabba Trading Application & Platforms
The Online dabba trading has established to a stage that operators now use Bucketing application and platforms. The operators use an integrated software platform to complete transactions for a range of customers.
The Bucketing interface is built to reduce the expenses of manual resources. Furthermore, as the sector continues to expand, the number of customers for dabba operators are growing significantly.
As a result, bucketing apps & platforms is designed to support numerous clients from multiple areas of the nation. To monitor current pricing, the operators now trade via application that is linked to the equity and commodities markets.
Locations
Last in end of our post what is dabba trading ? let’s have a look at the major locations where dabba trading brokers active. Rajkot, Jodhpur, Guwahati, Ahmedabad, Delhi, Kolkata, Kochi, Mumbai, Lucknow, and other main areas are known for Bucketing.
Despite the fact that many agencies and officials have recently filed Bucketing lawsuits, the unauthorized market manages to flourish.
Other related terms
IPO Grey Market
Grey Market Prior to its formal introduction for trading on the stock exchange, IPOs are offered for sale or purchase on an unofficial market. There are no restrictions surrounding an unregulated over-the-counter market since it is one. Cash is used exclusively for all personal transactions. No third-party companies, such as SEBI, the stock exchange, or brokers, are associated with or supporting this transaction.
Because there is no official platform or set of standards for these activities, grey market trading takes place among a small group of individuals. The phrases “Grey Market Premium” and “Kostak” are two that are frequently used in the IPO grey market.
Summary
We advise people to keep themselves away from this kind of activities and trade in the official stock market instead of Bucketing. The risk is normally high that you will lose your money.
This is all about Bucketing. We hope you now understand what is Dabba Trading? Let us know your views in the comment section.
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FAQ
is dabba trading legal?
No, it is illegal in India.
Who operates the Dabba trading?
There are many operators who operates the Dabba Trading.
Is Dabba trading also take place in Commodity market?
Yes, There are some operators which also active in Commodity market.
Online Dabba trading is possible?
Yes, There are now many software available in the market from which you can do online Dabba trading.
What is the major risk in Dabba Trading?
You can loss your full money as their is no regulatory which regulates Dabba Trading.
