BSE looks to prevent trade reversals in all equity derivative contracts from Monday

To ensure safety of the securities markets, top stock exchange BSE has decided to introduce the 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 trade reversal taking place on the exchange's trading platform which may have been undertaken for the purposes of tax evasion.

It will act as a preventive measure wherein the second leg of a potential reversal trade will be automatically cancelled by trading system at the time of order matching in an online real-time manner.

In a circular BSE said, "With effect from September 3, 2018, the 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.