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Market regulator Securities Exchange Board of India (SEBI) has changed the rules for setting price bands in futures and options stocks. These rules will come into effect from June 3. SEBI has made several changes in the dynamic price band guidelines to prevent sudden fluctuations in stocks and control misinformation.
Among the changes that have been made, there will now be 50 trades instead of 25. There will now be ten unique client codes instead of five unique client codes. There should be three trading members on both sides during trading. Along with these three major changes, a major change has also been made. Under which the cooling off period has been increased by one hour. Regarding the reduction in the price band, SEBI said that when a price band is adjusted in one direction, it will also be adjusted in the other direction. And orders outside the new price band will be canceled. So volatility will be reduced and orders will have to be placed near the (current market price CMP).
As per the earlier rule, cash or futures contracts opened with a price band of ten percent of the previous day's closing price. In which there could be an increase of five percent throughout the day. Provided that there are at least 25 trades including five unique customer codes. Also, the movement in the stock in any direction should be 9.90 percent or more. After adjustment in the circuit, it had a cooling period of 15 minutes. During this time, trading continued within the available band. In such a situation, there was a possibility of manipulation of the price. After receiving feedback from the market regulator, SEBI has changed the guidelines to deal with this risk.
A look at the important updates
Will there be 50 trades instead of 25? Will there be ten unique client codes instead of five? Should there be three trading members on both sides during a trade? Cooling off period extended by one hour
NSE reduces tick size to 1 paisa
NSE announced a reduction in ticket size for stocks priced below Rs. 250 per share. Currently, the tick size of such stocks traded on NSE is 5 paise, which has been reduced to 1 paisa. This means that for stocks priced below Rs. 250, buyers or sellers can place orders in multiples of 1 paisa. In case of BSE, the tick size for stocks priced below Rs. 100 is currently 1 paisa. According to experts, stocks that are very lowly priced have better price discovery due to the smaller tick size. This will also increase the liquidity and volume of the respective stock.
