TaxTMI 
TaxTMI 
Enhancement of Dynamic Price Bands for scrips in the Derivatives segment
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....aster circular dated October 16, 2023 for Stock Exchanges and Clearing Corporations and existing practice, is summarized below: a. Underlying in cash market and futures contracts have start of the day price band as 10% of yesterday's closing price of that scrip/contract as a dynamic price band. b. These price bands can be flexed by 5% of yesterday's closing price during the day as many times as required subject to the following conditions followed by the cooling off period c. In the event market trends in either direction, the conditions precedent for flexing is minimum of 25 trades to be executed with minimum 5 different UCCs on each side of the trade at or above 9.90% and so on. That is to say if 25 trades from ....
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....e band formulation for scrips in the derivatives segment is provided below. (A) Enhancing conditions precedent before flexing price band 3. To take care of issues related to sudden price movement / fat finger error etc., the conditions precedents, as mentioned at Para 1(c) of this Circular, are enhanced to 50 trades, 10 unique UCCs and 3 trading members on each side. (B) Aligning price bands between underlying and its futures contracts 4. In modification of the requirement mentioned at Para 1(f) of this circular, exchanges shall ensure that when conditions for flexing the price bands are satisfied on either underlying in cash market or current month futures contracts on any exchange, the price band would be flexed for the scrip ....
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.... on account of flexing 6. In modification of the practice mentioned at Para 1(g) of this circular, 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. This would limit the dynamic price band as scrip price trends in one direction and in effect limit the price volatility. This would also provide an opportunity to market participants to place their orders nearer to the prevailing market price. 7. For instance, yesterday's closing price was Rs. 100 and today's lower band and upper....
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....movement over the last traded price/ theoretical price to allow market participants to, for instance, hedge/close their open positions by executing trades in options during cooling off. d. 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. e. Stock Exchanges would put in place uniform formulation around the above requirements. 10. The Stock Exchanges are directed to: a. 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 ....