What Is a Contra Trade? SEBI Insider Rules (2026)

A contra trade is a trade in the opposite direction to one a designated person has already made, executed inside the cooling-off window that SEBI's insider trading code of conduct requires every listed company to set. Buy shares in March, sell them in May, and that sale is a contra trade if the company's code sets a six-month window. The restriction sits in the code of conduct, not in the trading prohibition itself, which is why the exact window varies by company.

What does SEBI's contra trade rule actually say?

The contra trade rule lives in Schedule B of the SEBI (Prohibition of Insider Trading) Regulations, 2015, the minimum standards for a listed company's internal code. Clause 10 reads:

"The code of conduct shall specify the period, which in any event shall not be less than six months, within which a designated person who is permitted to trade shall not execute a contra trade."

Three things follow from that wording. The six months is a floor a company can exceed. The restriction applies to designated persons who were permitted to trade, meaning they cleared pre-clearance and the trading window was open. And the rule is drafted as an obligation on the company to write the restriction into its code, which is why you find the operative number in each company's own PIT code rather than in the regulation.

A proviso added later carves out one case: the restriction does not apply to trades pursuant to exercise of stock options.

Who is bound by the contra trade restriction?

Designated persons, as each company identifies them, plus their immediate relatives. The category covers promoters, key managerial personnel, directors and the employees the company designates, along with the people a company brings in because of the access their role gives them. The same population files the initial and continual disclosures explained in PIT Form B vs Form C, and sits in the structured digital database of unpublished price sensitive information access.

Two parallel schedules extend the same idea elsewhere:

• Schedule B1 applies to asset management companies. Clause 9 sets a period of not less than two months for designated persons trading in units of the mutual fund, and excludes overnight schemes from the restriction.
• Schedule C applies to intermediaries and fiduciaries. Clause 8 keeps six months for the securities of a listed company the designated person is connected to, and two months for mutual fund units.

Can a compliance officer waive a contra trade?

Partly. Schedule B empowers the compliance officer to grant relaxation from strict application of the restriction, for reasons to be recorded in writing, provided the relaxation does not violate the regulations. That is a narrow door. The relaxation is a written, reasoned decision by a named officer, and it cannot be used to permit something the regulations otherwise prohibit, such as trading while in possession of unpublished price sensitive information.

What is the penalty for a contra trade violation?

The regulation names the consequence directly. Profits from a contra trade executed in violation, "inadvertently or otherwise", are liable to be disgorged for remittance to SEBI for credit to the Investor Protection and Education Fund. Note what is disgorged: the profit on the trade, not the proceeds. The word "inadvertently" matters too, because it removes intent as a defence at this level.

Schedule B1 goes one step further for AMCs, making "the profits or loss avoided" disgorgeable by the asset management company itself, credited to the same fund under intimation to SEBI.

Does a trading plan exempt you from the contra trade rule?

Not any more, and this is where a lot of older guidance is now wrong.

Regulation 5(3) carries two provisos for trades made under an approved SEBI trading plan. Pre-clearance is not required, and trading window norms do not apply. The second proviso used to end with the words "and restrictions on contra trade", which is what made trading plans a route around the cooling-off period. Those words were omitted by the SEBI (Prohibition of Insider Trading) (Second Amendment) Regulations, 2024, with effect from September 24, 2024. Contra trade restrictions now apply to trading-plan trades like any other.

The same 2024 amendment reshaped the plan itself. The cool-off before trading may commence is one hundred and twenty calendar days from public disclosure of the plan, substituted for the earlier six months by that same amendment. The clause requiring a plan to run for not less than twelve months was omitted entirely, as was the clause blocking trading around results. What survives is the bar on overlapping plans.

That is why an insider's disclosed trades sometimes look like they cut across a trading window closure. A pre-approved plan is a legitimate route past the window, and the plan itself is public. It is not a route past the contra trade rule.

A separate exemption does exist, but it is for a different instrument. Regulation 5D(1) deals with insiders trading in units of a mutual fund scheme, and its proviso lets an insider prove innocence where the transaction was triggered by an irrevocable trading plan approved by the compliance officer and disclosed at least sixty days before trades commence, with a plan period of at least six months and no overlap. That clause, not Regulation 5, is where the sixty-day and six-month numbers live, and it governs mutual fund units rather than listed-company securities.

How to read a contra trade in the disclosure record

You do not see the words "contra trade" on a filing. What you see is a designated person's Regulation 7(2) continual disclosure, filed with the exchange when the value of trades crosses ten lakh rupees over a calendar quarter. Reading two of those against each other is where the pattern shows up:

• Compare direction and dates across a person's own filings. A buy followed by a sale from the same person inside six months is the shape the code is designed to prevent, and the filings carry both dates.
• Check whether the trade was under a disclosed trading plan. The plan is on the exchange platform, and it explains a trade inside a closed window. Since September 24, 2024 it does not explain a contra trade.
• Check whether the trade was an option exercise, which the proviso carves out.
• Read the company's own PIT code for its actual window, which can exceed six months.

Flock reports the insider disclosures themselves, each stamped with its filing date and linked back to the exchange that published it. See how to track insider buying for the surfaces, and what is insider trading disclosure for the wider filing set. What any of it means for you is your call to make.