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

SEBI mandates all stockbrokers to track and report trading activity which is not performed in the normal course of transactions. One such type of trade which has to be reported by stockbrokers is a reversal trade.

Reversal trades are alleged to be non-genuine trades where:
  1. The same client(s) or group of clients are both buyers and sellers in the same transaction.
  2. A reversal of transactions is made by the same client(s) or within the same group of clients at significantly different trade prices within a short period of time.
  3. One client makes a significant profit and the other suffers a loss. These transactions are punched in an illiquid contract.
Note: You can respond to the email you have received with the requested clarifications. Your response or the absence thereof is required to be reported by us to the regulatory bodies.