In line with recent regulatory updates from the SEBI circular, Exchanges have implemented changes to the dynamic price bands and trading rules in the F&O segment. These updates are designed to enhance volatility management, improve trading stability, and reduce errors during extreme price movements.

• Old Criteria: A minimum of 25 trades was required with 5 different UCCs on each side of the trade at or above 9.90% or more of the base price.
• Revised Criteria: Now, a minimum of 50 trades must be executed with 10 different UCCs and 3 unique trading members on each side of the trade at or above 9.90% or more of the base price.

• When conditions for flexing the price bands are satisfied on either the underlying stock in the cash market or the current month (near month) futures contracts on any exchange, the price band would be flexed for both the stock and all futures contracts on that stock at the end of the subsequent cooling-off period.

• Old Criteria: Previously, the dynamic price band was relaxed by 5% at a time in the direction of price movement, in coordination with the other Exchange.
• Revised Criteria:
  • For the First Two Instances of Flexing: The price band will be flexed by 5% of the previous day’s closing price after a cooling-off period.  
  • Cooling-Off Period: 15 minutes if conditions for flexing are met before the last half-hour of trading, or 5 minutes if during the last half-hour.
  • For the Next Two Instances of Flexing: The price band will be flexed by 3% of the previous day’s closing price, with a cooling-off period of 30 minutes.
  • For Subsequent Instances of Flexing: The price band will be flexed by 2% of the previous day’s closing price, with a cooling-off period of 60 minutes.

Under the revised criteria for sliding price bands, whenever the price band of a contract is flexed in the direction of the price movement, the opposite price band will now also adjust by the same percentage. This allows the price band to slide in both directions rather than expand only in the direction of movement.
Revised Criteria:

• The opposite price band will flex concurrently by an equivalent percentage whenever the price band in the direction of the price movement meets the objective criteria (e.g., 50 trades with 10 different UCCs and 3 trading members on each side of the trade as per the circular NSE/FAOP/62241 dated May 30, 2024).
• This means that if there is an upward price movement, the lower band will also flex by the same percentage, and vice versa for a downward movement.

• Any pending orders with limit prices between ₹90 and ₹95, which fall outside the newly flexed bands, will be automatically canceled by the exchange.

• Stop-loss (SL) orders outside the new band will remain unaffected. If an SL order triggers and moves to the Regular Lot (RL/Main order book), only limit-price orders within the prevailing price band will be accepted.

Downward Flex Scenario

In a downward flex scenario:

• Similar treatment will apply, with pending orders outside the flexed lower band canceled, while SL orders will remain unaffected.

This sliding price band mechanism will go live on November 18, 2024, with a mock session scheduled for November 16, 2024, under Download Reference Number: NSE/FAOP/64995.

(E) Temporary Price Limits for Options Trading During Cooling-Off Periods  

Key Points:

• During a cooling-off period for the underlying stock or futures contract, a temporary floor or ceiling price will be set for options trading.

• These temporary limits are based on either the Last Traded Price (LTP) if the option is liquid, or a theoretical price if the option is illiquid.

• This provision enables traders to manage their positions effectively, maintaining market stability even during high volatility events.

This adjustment helps provide a balanced trading environment, allowing for necessary risk adjustments without uncontrolled price movements in the options segment.

The temporary limits for options trading will be live from November 18, 2024, with a mock session scheduled on November 16, 2024, under Download Reference Number: NSE/CMTR/64994.

• Order Cancellations: Orders placed outside the revised price bands will be automatically canceled by the exchange, except for untriggered stop-loss (SL) orders. This measure prevents trading at prices that exceed the adjusted bands, maintaining market orderliness.

For canceled orders, you will receive the following error messages:

• For Cash Segment:
• Error Message: "Order price is outside the revised price range"
• Error Code: 16521
• For F&O Segment:
• Error Message: "Order price is outside the revised price range"
• Error Code: 16020

These notifications will help you identify and rectify order placements that fall outside the allowable price range. Ensure your orders are within the active price bands to avoid cancellations.

• Concurrent Price Band Adjustments: With the introduction of sliding price bands, both upper and lower price bands will move together, depending on the direction of the price movement. This ensures balanced price ranges during periods of significant volatility, reducing the likelihood of sudden price fluctuations.

• Temporary Price Floors/Ceilings for Options: During the cooling-off period for underlying stocks or futures, temporary price limits in the options segment will provide traders with the ability to manage risk effectively without unchecked volatility. These temporary limits ensure that trading continues in a stable environment.

For further details, please refer to the circulars below:

SEBI Circular
NSE Circular on Derivatives
NSE Circular on Cash
BSE Circular on Derivatives
BSE Circular on Cash