The National Stock Exchange (NSE), on February 05, 2025, issued a notification regarding the Daily Price Limit and Limit Price Protection for Option contracts with Futures as underlying in Commodity Segment.
These measures aim to ensure orderly trading, prevent abnormal price fluctuations, and enhance market stability.
For Options Contracts with Spot as Underlying, the existing mechanism remains unchanged, as per earlier circulars issued by the Exchange. However, for Options Contracts with Futures as Underlying, the Exchange has introduced a dynamic Daily Price Limit (DPL) mechanism. The DPL will now be adjusted in response to extraordinary price movements in the corresponding futures contract, with the revised limits being communicated via trading terminals.
Additionally, a Limit Price Protection (LPP) mechanism has been introduced for Options on Futures to prevent erroneous order placements. Under this framework, a reference price will be determined based on the base price at market open and updated at 30-second intervals throughout the trading session. Orders placed outside the computed LPP range will be automatically rejected, and traders will receive an alert message on their trading terminals.
The LPP range will also be automatically adjusted when multiple order rejections occur in the same direction from different traders. Furthermore, passive orders that remain within the Operating Price Range (OPR) will continue to stay in the order book, even if the LPP range is updated.
To ensure regulatory compliance, the Exchange has advised trading members to act responsibly, as disruptive or misleading trading behavior may lead to regulatory action, including inquiries and investigations. Additionally, non-NEAT Front End (NNF) users will receive LPP range data through a dedicated broadcast mechanism to ensure transparency.
The new risk control measures will go live on February 10, 2025, with a mock trading session scheduled for February 8, 2025 to allow market participants to familiarize themselves with the updates. These enhancements aim to bolster market integrity, prevent excessive price swings, and ensure efficient price discovery in commodity derivatives trading.
[Notification No. NSE/COM/66509]
