Enhancement of Dynamic Price Bands for scrips in the Derivatives segment
Summary
SEBI mandates enhanced conditions for flexing dynamic price bands, requiring 50 trades from 10 unique UCCs and 3 trading members. The framework introduces a sliding price band mechanism where the opposite side of the band moves concurrently with price trends to limit volatility. Implementation is phased across three dates starting June 3, 2024, with specific operational procedures required within 45 days.
Text
conditions precedents... are enhanced to 50 trades, 10 unique UCCs and 3 trading members on each side.
exchanges shall ensure that when conditions for flexing the price bands are satisfied... the price band would be flexed for the scrip and all the futures contracts on this scrip across all exchanges
price band would be flexed by 5% of yesterday’s closing price after the cooling off period. This cooling off period would be 15 minutes if conditions for flexing are satisfied before last half an hour of trading and 5 minutes if conditions for flexing are satisfied in the last half an hour of trading.
price band would be flexed by 3% of yesterday’s closing price after the cooling off period of 30 minutes.
price band would be flexed by 2% of yesterday’s closing price after the cooling off period of 60 minutes.
whenever price band of a scrip or futures contracts is flexed in one direction, the price band on the other side would be flexed concurrently by equivalent amount in the direction of price movement. Orders pending in the erstwhile price band and the new price band, after sliding, would be cancelled by exchanges.
Stock Exchanges would put in place necessary mechanism to intimate trading members/clients regarding such cancelled orders.
temporary price floor or ceiling for options... would be placed in the options, once underlying scrip triggers cooling off... linked to LTP of options contract... If the LTP... is unavailable or stale, the temporary floor or ceiling... would be linked to theoretical price
Once price band for underlying scrip is flexed, at the end of cooling off period, the price band for options contracts would be flexed concurrently, thereby doing away with temporary floor or ceiling.
Prepare a comprehensive Standard Operating Procedure, within 45 days from the date of the circular, to implement various operational issues emanating from the circular and suitably intimate market participants regarding the same in due course;
Take necessary steps to put in place requisite infrastructure and systems for implementation of the circular, including necessary amendments to the relevant bye-laws, rules and regulations;
Bring the provisions of this circular to the notice of their members and also disseminate the same on their website;
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Source: SecMarx — Enhancement of Dynamic Price Bands for scrips in the Derivatives segment. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.