Zerodha Freak trade Erroneous

Freak-trade loss penalty

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A freak trade is an extremely off-market execution: a trade at a price far from the prevailing market. Indian exchanges have a framework for annulling or compensating affected parties for genuinely erroneous trades.

Exchange annulment framework

NSE / BSE rules:

  • Threshold: Trades executed at prices significantly deviating from prevailing price (specific thresholds defined).
  • Investigation: Exchange surveillance reviews; verifies if a genuine error.
  • Annulment: If confirmed, trade is annulled.
  • Compensation: Affected counter-parties compensated per the framework.

When the framework applies

Genuine freak trades:

  • Fat-finger orders.
  • Algorithm misconfiguration.
  • System errors.

Not eligible:

  • Aggressive market orders on illiquid scrips.
  • Slippage in normal trading.
  • Bad pricing decisions by the user.

Effect on penalties

Annulled trades:

  • No penalty.
  • No P&L attributed.
  • The reversal happens via the broker’s back-office.

For most retail clients, freak trades and their annulment are rare.

See also

External references

References

  1. NSE India, Freak trade annulment framework, nseindia.com.
  2. SEBI, Trade error framework, sebi.gov.in.

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