In a proactive move to bolster pre-trade risk control measures, the Exchange has announced the implementation of the Limit Price Protection (LPP) Mechanism in the Equity Derivatives segment, effective from April 16, 2024. This change will replace the existing Price Reasonability Check (PRC).
The LPP Mechanism will accept limit price orders within specified ranges determined by the reference price, with higher limits for buy orders and lower limits for sell orders. Orders falling outside these ranges will be automatically rejected.
The reference price for each contract will be calculated using the Black Scholes model at the start of the market or based on trade prices during trading hours. In the absence of trading activity, the previous reference price will persist until updated.
LPP validation will extend to order modifications and stop loss-limit orders but will not be applicable to certain contract types, such as calendar spread futures and option strategy contracts.
Moreover, the LPP range for a contract may be adjusted automatically under specific conditions, involving rejected orders from multiple trading members.
Existing passive orders in the order book will remain active for matching, even if the LPP range changes based on updates in the reference price.
Market participants are advised to take note of changes in the ETI API to accommodate these enhancements. Contract-wise LPP ranges will be provided through market data broadcast channels.
To facilitate a seamless transition, these changes will be available for testing during the mock trading session on April 13, 2024.
The Exchange plans to review these measures periodically based on usage and feedback from market participants, with the potential for further improvements or changes as necessary. Therefore, market participants are encouraged to familiarize themselves with the LPP functionality and conduct thorough testing of their systems before implementation.
Sources: bseindia.com