Trade-For-Trade Status Better Explained
(To say these stocks are non-DTC is INCORRECT)
The decision to put a security for trade-for-trade is usually taken by Stock exchanges and this decision is influenced by many factors. For if they find that the total floating stock (i.e. number of shares held and traded by public) is very less and if they see suspicious trading pattern and if they see that these are structured ring trades being placed to create artificial volume and price movement by speculative interests, they will decide to put the security in trade-for-trade.
With low floating stock, I mean, these are not large cap stocks and the number of shares that is issued to public and thus tradable on exchange are less to such an extent that they are sometime subjected to artificial movements by any cartel. With less number of shares circulating in the Markets, it is easier to manipulate price by putting circular artificial trades by the group of people.
Yes, putting a company in trade-for-trade is definitely suspicious. It may not say that the company has done something wrong, but it is more of a prevention measure taken by stock exchange and regulators if they find apparent proof of price manipulation or at least a possibility of such occurrence.
Regarding the securities being put in trade to trade basis, it has got nothing to do protect the share / holding structure. It means that when a security is put for trade to trade segment, any purchase trade compulsorily results into taking the delivery and and any sell trade compulsorily results into giving of the securities. In other words, NO INTRADAY TRADES ARE PERMITTED.
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