What Is Dabba Trading?
Dabba (empty box) trading refers to illegal or parallel stockmarket deals those that aren’t routed through the
official exchanges.

Is It A New Phenomenon?
No. It is no different from ‘kerb’ deals of the 1990s, which disappeared with the advent of screen-based
trading.

Why Has It Returned?
Regional exchanges have become defunct. Brokers from these exchanges have reinvented ‘kerb’ dealing under
a new name, dabba.

How Does Dabba Trading Work?
In three ways. One, it happens at a broker’s office where two clients transact directly without routing the trade
through the exchange. Two, brokers and investors assemble at a pre-ordained place. In the past, the
stockmarket watchdog, SEBI superseded the board of Ahmedabad Stock Exchange for allowing an unofficial
market to exist within its premises. Three (the most prevalent), the two parties entering into a dabba
transaction through the exchanges (in the ratio 1: 100; that is, if the unofficial deal is for 100 shares, the
official one is for 1 share) to keep track of the price at which the transaction is effected.

What Is The Lure of Dabba?
First, investors can take a forward position (settlement happens on a future date at a price agreed upon on the
day of the trade) without any margin requirements (stock exchanges mandate that anyone taking forward
position has pay a certain amount every day depending on the stock’s volatility). Second, they can take
forward positions on all counters and not just the ones allowed by SEBI.

So, What’s Bad About Dabba?
Problems in the dabba market can spread to the stock exchanges as most dabba brokers operate on the
exchanges. And unlike kerb deal which used to be reported to the exchange the next day, all dabba
transactions are in cash. Since no contract notes are issued, investors can’t claim any protection from
unscrupulous brokers. Three, dabba trading could result in tax evasion.