In a move aimed at bolstering pre-trade risk control measures, the Bombay Stock Exchange (BSE) has announced the implementation of a Limit Price Protection (LPP) mechanism in its equity derivatives segment, effective April 16, 2024.

The new mechanism, unveiled on Friday, April 5, will restrict the price range for orders in the derivatives market. Under this initiative, the trading system will accept limit price orders within specific thresholds based on the reference price. ()

Orders falling outside this range will be automatically rejected. ()

According to the BSE circular released on April 5, the exchange emphasized, “To strengthen the pre-trade risk control measures in the equity derivatives segment, Exchange will implement LPP Mechanism with effect from Tuesday, April 16, 2024.”

To ensure a seamless transition and allow market participants to familiarize themselves with the new mechanism, the BSE has scheduled a mock trading session for April 13, 2024 (Saturday).

The LPP mechanism’s primary objective is to safeguard against unusual trading activities and curb erratic trades. Orders placed outside the defined price range will be automatically rejected by the system.

The BSE’s move follows a similar initiative by the National Stock Exchange (NSE) in October 2022, which introduced an LPP mechanism in its futures and options segment to fortify pre-trade risk controls and ensure orderly trading.

The BSE highlighted that it would periodically review the utilization of these enhancements and make further adjustments based on feedback from market participants and as deemed necessary.

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