Wash Sale refers to transactions in which there is no genuine change in beneficial ownership of a security. This happens when a client has an existing open order for a security and then submits a new order for the same security on the opposite side which will match with the existing open order.
For example:
Open Order A - Sell XYZ with limit price of P100.00
Client submits a new order B - Buy XYZ with limit price of P101.00
Order B will match with Order A. This means that both orders will be filled. However, the beneficial owner (client) will remain the same.
The SEC specifically prohibits this type of transaction; therefore, all orders with the potential to become wash sales are rejected.