Pre-trade Risk Controls

Pre-trade risk controls tighten order checks and dynamic price bands to prevent aberrant trades and require broker risk-reduction.

SEBI mandates a framework of pre-trade risk controls for stocks, ETFs, index and stock futures requiring exchanges to block single orders above a prescribed value, ensure brokers apply client-level value/quantity checks and cumulative open order value limits, and monitor broker controls with penalties for non-compliance. Exchanges must implement tightened dynamic price bands for securities with derivatives and allow staged relaxation during market trends. A mandatory risk-reduction mode triggers when broker collateral utilization against margins reaches a high threshold, cancelling unexecuted orders, permitting only immediate-or-cancel orders, enforcing margin checks, and reinstating normal mode when utilization falls below the threshold.