Premier stock exchange NSE today said it will introduce from August 3 a mechanism to prevent self-trades on the currency derivative segment.
"Members are requested to note that the 'self-trade prevention' mechanism shall be introduced in currency derivatives segment with effect from August 3, 2015," the National Stock Exchange (NSE) said in a circular.
Under the mechanism, 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 such an order "shall be cancelled by the exchange with rejection message" by the system.
"The mechanism shall be applicable only to proprietary and client - non custodial participant orders," NSE said.
"The mechanism shall be applicable only during matching. Members shall take due precaution to prevent self- trade while performing trade modification," it added.
Self-trades do not result in change of ownership as the buyer and the seller are the same. There has been an increase in such trades, with the aim of creating artificial volumes to manipulate prices.
Currently, there is no prohibition on self-trades - they are not always fictitious in nature and are part of normal trading activity.
However, market regulator Sebi takes action against entities doing this with mala fide intent under its 'Prohibition of Fraudulent and Unfair Trade Practices' norms.
