How will NSE’s self-trade prevention mechanism affect Cover Orders?

NSE's self-trade prevention mechanism can affect cover orders in a few ways. For one, if a trader places a counter order that matches the stop loss or target orders of a cover order, the position will remain open without any target or stop loss order associated with it. This means that the trader will no longer have the protection of a stop loss or target order on the position, which could potentially lead to greater losses or missed opportunities.

The NSE implemented this mechanism in 2015 to prevent self-trade for clients who have both buy and sell orders open for the same scrip at the same price. The mechanism is described in detail in this NSE document. Click here to know more.

If a client places a counter order matching the CO Stop Loss or Target orders, the position will be left hanging with no target or SL order.

1. Place a Buy CO (Cover Order) at market price (LTP is 100) with a stop loss of 99. (Both of these orders get placed at the exchange simultaneously). If the scrip falls to 99 before the first leg is executed, the SL order will be triggered.