I received an email from Kotak Securities seeking clarification for 'reversal trades' done in my account. What does this mean?

As per SEBI, trades being reversed on the same day with the same parties with whom they were matched earlier are considered non-genuine trades. These are known as reversal trades.

  • These reversal trades are usually executed in illiquid contracts with a view to create artificial volume in the market.

  • These reversal trades are alleged to be non-genuine in nature as they are executed in the normal course of trading, which leads to a false or misleading appearance of trading in terms of generating artificial volumes

MCX has also defined abnormal or non-genuine trades as those transactions executed by the same set of parties at abnormally high prices that have no correlation to the underlying spot or futures price of a contract.

In case you get an E-mail or SMS asking for clarity on certain types of trades, which Exchanges deem to be reversal trades, you can respond back with the requested details, since we, as stock brokers, will need to report them to the Exchanges.