As per the circular dated 5th April 2024, the Bombay Stock Exchange of India has announced that to further strengthen the pre-trade risk control measures for preventing aberrant orders and to ensure orderly trading, the Exchange has introduced the mechanism of Limit Price Protection (LPP). As a result, the following changes are applicable with effect from 16th April 2024 (Changed to 23rd April, Tuesday - Details at the bottom):

LPP range will be the range on both sides of the reference price to validate the price of limit orders.

1. The reference price for each contract will be computed as follows:
   • At market opening, it will be computed theoretically using the Black Scholes model (for option contracts) using underlying price as discovered in the cash market pre-open session. In case the underlying price is not available at the time of computation, the reference price will be the previous close price of the contract.
   • During trading hours, the reference will be the simple average of trade prices of that contract in the last 30 seconds. For contracts that have traded in the last 30 seconds, the reference price will be revised throughout the day at 30-second intervals. For contracts that have not traded in the last 30 seconds, the reference price will not be revised. However, if a contract remains untraded for a continuous 15 mins from the last reference price update event, the reference price will be the theoretical price based on the latest available underlying price.
2. The LPP range on both the side of the reference price will be computed as follows:
   • OPTIDX <= ₹50 +/- ₹30 or +/- 60%
   • FUTIDX and other applicable derivatives +/- 3% or the minimum LPP value of ₹1.50
3. The Exchange will automatically reject any incoming Limit order placed beyond the LPP range as below:
   • Buy order price > High LPP limit
   • Sell order price < Low LPP limit
4. The LPP validation is also applicable for order modification requests. Order modification requests having prices beyond LPP limit will be rejected.
5. LPP will be an additional validation subject to the order price being within the prevailing Operating Price Range (OPR).

Refer to the table below to understand the LPP computation with examples:

Note:

• When an order is rejected on account of LPP validation, the following message will be displayed on our trading platforms: 

"Order price is beyond LPP limit."

• For the SL-Limit orders, aforesaid validation will be applicable post-trigger of the order while releasing in the Regular Lot (RL) book, considering prevailing LPP limits.
• Pending orders, i.e., existing outstanding orders that are within the OPR, will continue to remain in the order book even if the LPP range has moved and will be matched as per price-time priority.
• The LPP mechanism is applicable to all Equity Derivatives.

For more details, refer to this circular: BSE circular.

Update!

As per the circular dated 15th April 2024, the BSE has announced that the implementation date will be revised to 23rd April 2024. Other things remain the same, as explained above. For more details on the change, refer to this circular.