Tighter price bands for index stocks
“It has been decided to tighten the initial price threshold of the dynamic price bands. Stock exchange shall set the dynamic price bands at 10% of the previous closing price...” stated a circular issued late on Thursday.
Further, the dynamic price bands can be relaxed by the stock exchanges in increments of 5% based on the market movement.
Such price bands would be applicable on stocks on which derivatives products are available and also on stocks included in indices on which derivatives contracts are traded. Further, this will also be applicable on index futures and stock futures.
The capital market watchdog has also introduced order-level checks, including minimum pre-trade risk controls for all categories of orders. Exchanges will also have to ensure that stock brokers put in place a mechanism to limit the cumulative value of all unexecuted orders placed from their terminals to below a threshold limit set by the stock brokers.
Any order with value exceeding R10 crore will now not be accepted by the stock exchange for execution in the normal market. Further, the exchange will have to ensure that appropriate checks for value and/or quantity are implemented by stock brokers based on the respective risk profile of their clients.
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