Our systems have generated an alert, whereby we have noticed that you’ve made self-trade for the symbol name OIL , EQ which you bought from Zerodha for 5000 qty and sold the same through another broker.
We are sending you an email to clarify the reason behind such transaction.
Would you let us know the reason please and reply back to this mail?
I trade with both Zerodha & Sharekhan based on the signals generated by my system. I traded OIL in both the accounts basis the respective trade signal.
Please help me understand the reason for this complaint. Is there anything wrong with this ?
Such unethical strategies are used by market manipulators and operators.
Say you have 1 crore in one account and 1 crore in another. Scrip is trading at 100.
Now you put in Offer at 102, and no one else is buying at 102. But you yourself from other account put in 102 bid and trade happens. Here the price will shoot to 102 with no trade happening in reality. You can do this continuously to take a price whichever direction you want!
This is called self-trade.
Illegal. But don’t know implications here
An exchange will keep track of all the trades carried by you & if any trades looks suspicious (buying & selling deep OTM contracts in the different account ) they ask the broker to get clarification from the clients.
As brokers, we have a mechanism to generate alerts in the event that a particular transaction is deemed to be suspicious in nature. This is to ensure that there are no unethical practices followed and no wilful attempt to launder money. Additionally, the Exchanges also generate alerts at their end and disseminate it to members for us to follow up with the client and get suitable clarifications. In such an event, our team would have gotten in touch to seek information.
As @maddy_Des has rightly said, there are entities that involve themselves in such unscrupulous activities, manipulating stock/contract prices to make unfair gains, create artificial volumes etc. which violates the regulations set forth by market regulators. While you may not have done it with such an intention, it’s best to ensure that you don’t trade illiquid contracts to ensure your trades don’t result into self trades.
While there are no penalties for now, it’s best to avoid them in your own interest since all trades are logged and any attempts to manipulate the Capital markets are viewed upon seriously by market regulators.