BSE to launch auto-cancellation of reversal trades

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To ensure safety of the securities markets, top stock exchange BSE will introduce a mechanism to automatically cancel reversal trades executed on its equity derivatives segment from next week.
The mechanism -- Auto-Cancellation of Reversal Trades -- would focus on prevention of reversal trades on the exchange trading platform.
In this measure, the second leg (latest leg) of a reversal trade will be automatically cancelled by the exchange at the time of order matching in an on-line real time manner in the trading system.
"Trading members are hereby informed that the exchange proposes to make the aforesaid check live in equity derivatives segment with effect from Monday, March 14, 2016," BSE said in a circular.

Besides, a mock trading session would be conducted on March 12 to enable the trading members to conduct necessary testing of their trading applications for this check.
The facility would be 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.

Earlier, BSE had implemented self-trade prevention check (STPC) functionality and periodic price bands to curb manipulation in the capital markets.