1. What is Reversal Trade Cancellation Mechanism (RTCM)?

RTCM is designed to:

• Automatically cancel trades classified as reversal trades.
• Prevent artificial volumes and abnormal trading activities in the market.
• Operate on an intraday basis in the Equity Derivatives Segment.

2. Conditions for Reversal Trade Cancellation

A trade is considered a reversal trade when:

• It involves two parties (identified by PANs or CP codes).
• The same quantity of a contract is bought and sold between these parties.
• The trade breaches any of the thresholds outlined below:

3. Example of Reversal Trade

• First Leg: PAN A buys 500 units from PAN B.
• Second Leg: PAN A sells 600 units to PAN B.

Outcome:

• Reversal Quantity: 500 units.
• Reversal Ratio: 83.33%.
• Square-off Difference: ₹2500.
• Reversal Quantity Ratio: 50%.

If these parameters breach NSE’s thresholds, the trade will be canceled automatically.

4. Client Code Modifications

Trades arising from Client Code Modifications during market hours that result in reversal trades will also be canceled under RTCM.

5. Timing of RTCM

• Active Hours: 10:30 AM to 3:00 PM.
• Trades executed between 9:15 AM and 10:30 AM will be monitored for potential reversal trade cancellation.
• RTCM does not apply to trades executed after 3:00 PM (last half-hour before market close).

6. Contracts Covered Under RTCM

RTCM applies to:

• Monthly Expiry Contracts: Futures and Options contracts nearing expiry.
• Weekly Expiry Contracts: Index Futures and Options, subject to specific conditions.

7. What Happens When a Reversal Trade is Detected?

• The trade will be automatically canceled by the Exchange.
• A notification will be sent to the trading member’s terminal.

8. Key Benefits of RTCM

• Prevents non-genuine trades and artificial market activity.
• Enhances market transparency and integrity.

For more details, refer to the official NSE circular here.