NSE strengthens self-trade prevention mechanism

To further strengthen the self- trade prevention mechanism, National Stock Exchange (NSE) today said brokers will have the option to stipulate at the time of order entry whether to cancel passive or active orders resulting in self-trade.
The exchange has taken the decision after receiving feedback from members for further strengthening the self-trade prevention mechanism.
The new mechanism will be introduced in the currency derivative segment from July 4, while it will be applicable in capital market and future and option segments from July 11.
A self-trade refers to the same entity placing a buy and a sell order in the same stock through the same broker. Such trades can be misused to move stock prices.

"Member shall have option to stipulate at the time of order entry whether to cancel passive order or active order resulting in self-trade," NSE said in a circular.
"If an active order is likely to match with a passive order belonging to the same member client or same member- proprietary combination in the same order book, then active or passive order as per the option set in order entry shall be cancelled by the exchange with rejection message as the order could have resulted in self-trade," it added.

The mechanism will be applicable to proprietary and client (including custodial participant) orders.

Besides, the facility will be applicable only during matching.
NSE also asked members to take due precaution to prevent self-trade while performing trade modification.