The Bombay Stock Exchange (BSE) on September 15, 2023, issued an Advisory for the Prevention of Erroneous Orders.
This advisory is being issued in light of the recent instance of wide price movement in the Sensex Call Option of 67000 strikes on September 08, 2023 arising on account of Stop Loss Market Order (SL-M) without due price protection.
In this connection, Trading Members (TM) are reminded to exercise due care while placing orders, especially on important attributes like scrip name, quantity, price, Stop Loss etc. in the trading system to prevent any errors in order placement.
The Trading Members must note the following key features of Stop Loss orders:
• Two types of stop loss orders can be placed by the Trading Members and its users viz.,
o Stop Loss - Limit (SLL) for placing Stop Loss orders with Limit Price
o Stop Loss - Market (SLM) for placing Stop Loss orders with Market Price.
• For SLL orders, a Price Reasonability Check (PRC) acts as an effective control measure wherein, orders having a price beyond the Price Reasonability Range (PRR) are rejected by the system.
• For SLM orders, Trading Members can set up limits for Market Price Protection (MPP) at the TM end or user end. This limit setting is an important exercise requiring due care and diligence at TM's end. TM needs to balance between the business need, risk appetite and the required control in arriving at the appropriate limit at their end as well as the user end.
In view of the safety of TMs, and clients and also maintaining the normalcy of the market, TMs are once again called upon to immediately review the Stop Loss Order Limit and MPP limit settings in their System both at the TM and user level.
[Notice No. 20230915-33]
