New Delhi, Capital markets regulator Sebi on Friday amended the guidelines for dynamic price bands for stocks in the derivatives segment to strengthen volatility management and reduce information asymmetry.
For stocks excluded from the price band requirement, a system of dynamic price bands (or operating ranges) has been implemented by stock exchanges.
Currently, cash market and futures contracts start with a price band at 10 percent of the previous day's closing price, which can be adjusted by 5 percent during the day if at least 25 trades have 5 unique customer codes (UCCs). ) Join. Each side 9.90 percent or more. Each adjustment is followed by a 15-minute cooling-off period, during which trading continues within the existing band.Based on the feedback, SEBI has modified these rules, increasing the conditions for adjustment to 5 trades, 10 unique UCCs and 3 trading members on each side, as per its circular.
When the conditions for adjusting the price band in the cash market or current month futures contracts on an exchange are met, the price band for the share and all its futures contracts in all exchanges will be adjusted after the cooling-off period.
To manage the instability, it has been decided that the cooling off period of 1 minute will be increased and the flexing percentage of 5 percent will be reduced in a calibrated manner.
For the first two adjustments, the price band will be increased by 5 percent after a cooling-off period of 15 minutes (5 minutes if the adjustment occurs in the last half hour of trading). For the next two adjustments, the price band will increase by 3 percent after a cooling-off period of 30 minutes and for further adjustments, the price band will increase by 2 percent after a cooling-off period of 60 minutes.On falling price bands, SEBI said that when one price band is adjusted in the direction, the band in the opposite direction will also be adjusted, and orders outside the new price band will be cancelled, thereby reducing volatility and Participants will be allowed to place orders closer to the present. market price.
On options trading, Sebi said that during the cooling-off period, a temporary price floor or ceiling will be imposed on short traded or theoretical price linked option contracts, to allow hedging or closing positions. Once the price band of the underlying stock becomes flexible, the price band of the option will be adjusted accordingly. Stock exchanges will inform trading members and clients about canceled orders and ensure compliance with these new rules.The circular will be implemented by the stock exchanges in a phased manner from June 3.
For stocks excluded from the price band requirement, a system of dynamic price bands (or operating ranges) has been implemented by stock exchanges.
Currently, cash market and futures contracts start with a price band at 10 percent of the previous day's closing price, which can be adjusted by 5 percent during the day if at least 25 trades have 5 unique customer codes (UCCs). ) Join. Each side 9.90 percent or more. Each adjustment is followed by a 15-minute cooling-off period, during which trading continues within the existing band.Based on the feedback, SEBI has modified these rules, increasing the conditions for adjustment to 5 trades, 10 unique UCCs and 3 trading members on each side, as per its circular.
When the conditions for adjusting the price band in the cash market or current month futures contracts on an exchange are met, the price band for the share and all its futures contracts in all exchanges will be adjusted after the cooling-off period.
To manage the instability, it has been decided that the cooling off period of 1 minute will be increased and the flexing percentage of 5 percent will be reduced in a calibrated manner.
For the first two adjustments, the price band will be increased by 5 percent after a cooling-off period of 15 minutes (5 minutes if the adjustment occurs in the last half hour of trading). For the next two adjustments, the price band will increase by 3 percent after a cooling-off period of 30 minutes and for further adjustments, the price band will increase by 2 percent after a cooling-off period of 60 minutes.On falling price bands, SEBI said that when one price band is adjusted in the direction, the band in the opposite direction will also be adjusted, and orders outside the new price band will be cancelled, thereby reducing volatility and Participants will be allowed to place orders closer to the present. market price.
On options trading, Sebi said that during the cooling-off period, a temporary price floor or ceiling will be imposed on short traded or theoretical price linked option contracts, to allow hedging or closing positions. Once the price band of the underlying stock becomes flexible, the price band of the option will be adjusted accordingly. Stock exchanges will inform trading members and clients about canceled orders and ensure compliance with these new rules.The circular will be implemented by the stock exchanges in a phased manner from June 3.
