The National Stock Exchange of India (NSE) on October 28, 2022 has issued notification in relation to Pre-Trade risk controls. This shall be in effect from October 31, 2022.
The following mechanism of Limit Price Protection (LPP) has been put in place namely: -
• LPP range shall be the range on both sides of the reference price to validate price of limit orders.
• Reference price for each contract shall be computed as follows:
A. At market open –
i. It shall be computed theoretically using underlying price as discovered in the cash market pre-open session, benchmark interest rate as MIBOR rate (for option contracts, Black Scholes model shall be used along with appropriate volatility).
ii. In case underlying price is not available at the time of computation, reference price shall be base price of the contract
B. During trading hours –
i. It shall be the simple average of trade prices of that contract in the last 30 seconds. For contracts that have traded in last 30 seconds, the reference price shall be revised throughout the day at 30 seconds interval.
ii. For contracts that have not traded in the last 30 seconds, the reference price shall not be revised.
iii. In case contract remains untraded for continuous 15 mins from last reference price update event, the reference price shall be the theoretical price based on the latest available underlying price (or base price of the contract if underlying price is not available).
• Exchange shall also provide broadcast for the applicable Limit Price Protection Ranges for Non-NEAT frontend (NNF) users
Please refer to the notification for further information
[Notification No. NSE/FAOP/54242]
