Tuesday, December 22, 2015

BSE plans to introduce Auto-Cancellation of Reversal Trades

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The Exchange constantly endeavours to ensure safety and integrity of the market and to curb instances of manipulation in order to protect interests of investors, at large. In line with the same, the Exchange has proactively implemented various regulatory measures in recent past such as - 

1.  Self-Trade Prevention Check (STPC) functionality – Earlier this year, BSE, with an objective to bring in more transparency, as a proactive measure has already put in place a system to prevent self-trades at the time of order matching at the UCC level in first phase. BSE’s Self Trade Prevention Check is based on the best international practices which also follows the member client level format where the validation is performed at Order matching level thereby preventing execution of orders having potential of resulting in self trades.  It may be noted that internationally, the said functionality is provided as a service which brokers can opt for whereas BSE’s STPC functionality is implemented as a mandatory regulatory measure without discriminating between members. By implementing the same, BSE became the first Exchange in India to introduce such pro-active measure across segments and has been able to eliminate self-trade cases for orders received on the BSE’s trading system.

2.  Enhancement of the STPC functionality – After successful introduction of this functionality earlier this year, the Exchange went one step ahead to further enhance this feature in September-October 2015 wherein PAN based STPC was introduced. The PAN based STPC eliminates self trades arising out of a single PAN across multiple brokers. By implementing the same, BSE once again became the first Exchange to introduce such a pro-active measure across segments in India.

3.  Introduction of Periodic Price Bands - To prevent excessive price movement in the securities listed on its trading platform, the Exchange introduced periodic price bands in October 2015 for securities exclusively listed and traded on BSE Equity Trading Platform including securities listed on SME and SME ITP platform.

Auto cancellation of Reversal Trades –

In continuation of above measures and as a next step in ensuring market safety, the Exchange proposes to introduce one more measure shortly. This measure called as ‘Auto-Cancellation of Reversal Trades’ shall focus on prevention of reversal trades on the exchange trading platform. In this measure, the second leg (latest leg) of a reversal trade shall be automatically cancelled by the exchange.

The implementation plan of the said functionality shall be communicated shortly. 

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