Local proxy neighbor discovery is like local proxy ARP. It is useful in the residential bridging environment where end users are not allowed to talk to each other directly.
When local proxy ND is turned on for an interface, the router:
responds to all neighbor solicitation messages received on the interface for IPv6 addresses in the subnets unless disallowed by policy
forwards traffic between hosts in the subnets of the interface
drops traffic between hosts if the link-layer address information for the IPv6 destination has not been learned