Dabba trading, also known as bucket shop trading, is an unregulated form of stock trading that operates outside traditional exchanges like Nasdaq and NYSE. It is an illegal practice in India that involves making off-market wagers on stocks or commodities that take place outside the stock exchanges. Here are some key features of dabba trading:

• Origin: The term "dabba" originates in Hindi, translating to "box." Historically, dabba referred to the cardboard boxes used to store and transport trading documents.

• How it works: In dabba trading, traders deal directly with dabba trading facilitators who maintain their own internal systems. These people act as a counterparty for both buyers and sellers without any involvement from legitimate exchanges or clearing corporations. All trades in the dabba system are settled in cash.

• Risks: Dabba trading is risky and often operated by people who can go to any extent to extort money from traders in case they are unable to pay their losses. Involvement of goons in such cases is very common. It is also a method to change black money into white.

• Legal status: Dabba trading is illegal in India and is recognized as an offense under Section 23(1) of the Securities Contracts (Regulation) Act (SCRA), 1956. It is also violative of the securities laws and falls within the purview of Sections 406, 420 and 120-B of the Indian Penal Code.

In conclusion, dabba trading is an illegal and risky practice that operates outside traditional exchanges and is not regulated by any governing rules and regulations. It is important for investors to avoid dabba trading and participate only in authentic trading in the stock market that follows all regulatory guidelines.