Trade annulment under exchange bye-laws remains exceptional; market orders in a volatile options market did not show material mistake.

Trade annulment under exchange bye-laws is an exceptional remedy available only where the trade is shown to be vitiated by fraud, wilful misrepresentation or material mistake. Here, market orders were placed to square off large client positions on the last trading day and in the closing minutes of a volatile options market. The surrounding facts, including multiple dealers, a supervisor, inconsistent explanations and the trading system's operation, did not establish a material mistake warranting annulment. The request for annulment was therefore rightly rejected, and the challenged trades were sustained.

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Issues: Whether the impugned trades in NIFTY options were liable to be annulled under the Exchange bye-laws on the ground of fraud, wilful misrepresentation or material mistake in trade.

Analysis: The governing bye-law permits annulment only in rare cases where the relevant authority is satisfied that the trade is vitiated by fraud, wilful misrepresentation or material mistake. On the facts, the orders were placed as market orders for squaring off large client positions on the last trading day and in the closing minutes, when prices in the options segment could move rapidly within the range determined by the prevailing pricing methodology. The surrounding circumstances, including the involvement of multiple dealers and a supervisor, the inconsistent explanations given for the request, and the known functioning of the trading system, did not support a conclusion that the executions resulted from a material mistake warranting annulment.

Conclusion: The request for annulment was rightly rejected and the impugned trades were not liable to be annulled.

Final Conclusion: The appeal failed because the challenged trades did not satisfy the narrow grounds for annulment under the Exchange framework, and the order declining relief was sustained.

Ratio Decidendi: Trade annulment under exchange bye-laws is an exceptional remedy available only when the trade is shown to be vitiated by fraud, wilful misrepresentation or material mistake, and a conscious choice to use market orders in a volatile and automated market does not, by itself, establish such a mistake.

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