Self-trades are regulatorily suspect because they look like wash-trading even when accidental, and they are operationally pointless: you pay fees to move a position from your left hand to your right.
Venues offer modes such as cancel newest, cancel oldest or cancel both, configured against a firm or account identifier. Any firm running several strategies on one instrument needs this on.
Example: a mean-reversion strategy bids 1,000 at 25.00 while a momentum strategy sends a market sell for 1,000. Without STP, the firm trades with itself, prints 1,000 shares on the tape, pays both a take fee and possibly loses a maker rebate, and generates a surveillance alert. With cancel-newest STP, the resting bid survives and the sell skips it.
Related: wash-trading, pre-trade-risk-check, order-to-trade-ratio, matching-engine