Markets

New mechanism to prevent reversal trades in equity derivatives segment

PTI New Delhi | Updated on August 31, 2018 Published on August 31, 2018

To ensure the safety of the securities market, the Bombay Stock Exchange has decided to introduce a mechanism to automatically cancel reversal trades executed on all contracts in equity derivatives segment from Monday.

The mechanism, Reversal Trade Prevention Check (RTPC), is aimed at preventing potential cases of reversal trades which may have been undertaken for the purpose of tax evasion. It will act as a preventive measure wherein the second leg of a potential reversal trade will be automatically cancelled by the trading system at the time of order matching in an online real-time manner.

BSE said in a circular, “With effect from September 3, 2018, RTPC shall be made applicable on all contracts available for trading in the equity derivatives segment except for futures contracts on stocks and S&P BSE Sensex for all market participants.’’

Earlier in March 2016, the exchange had introduced RTPC on select set of contracts in equity derivatives segment. The facility was applicable on all contracts available for trading in the equity derivatives segment except for stock futures, futures contracts as well as current and near-month options contracts on S&P BSE Sensex.

Reversal of trade implies that for a buy transaction initially entered into by a broker for a particular client for a specific quantity, there is a corresponding sale transaction which takes place during the day for the same quantity between the same set of broker/clients and vice-versa.

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Published on August 31, 2018
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