Description

BSE revises Limit Price Protection (LPP) parameters for equity derivatives, modifying ranges for index options and futures effective December 1, 2025.

Summary

BSE has revised the Limit Price Protection (LPP) parameters for the Equity Derivatives segment, partially modifying earlier circulars from April 2024. The new LPP ranges increase protection levels for index options to 40% (minimum Rs. 20) and maintain index futures at 2% (minimum Rs. 200). These changes take effect from December 1, 2025, and will be available for testing in the mock trading session on November 29, 2025.

Key Points

  • LPP framework parameters revised based on periodic review
  • Index Options: LPP range increased to 40% on reference price, subject to minimum absolute value of Rs. 20
  • Index Futures: LPP range set at 2% on reference price, subject to minimum absolute value of Rs. 200
  • Revised parameters effective from Monday, December 1, 2025
  • Testing available in Mock Trading Session on Saturday, November 29, 2025
  • Partial modification of circulars 20240405-40 (April 5, 2024) and 20240420-1 (April 20, 2024)

Regulatory Changes

The exchange has modified the LPP mechanism parameters for equity derivatives:

Previous vs New Parameters:

  • Index Options: Updated to 40% on reference price (minimum Rs. 20)
  • Index Futures: Updated to 2% on reference price (minimum Rs. 200)

The LPP mechanism prevents orders from being placed beyond specified price ranges from the reference price, acting as a pre-trade risk control measure.

Compliance Requirements

All trading members must:

  1. Update Systems: Ensure trading systems are configured with revised LPP parameters before December 1, 2025
  2. Test in Mock Session: Participate in mock trading session on November 29, 2025 to validate changes
  3. Strengthen Risk Controls: Review and enhance pre-trade risk management measures
  4. Order Price Discipline: Avoid placing orders at unrealistic prices that may cause order book imbalances
  5. Stop Loss Review: Review and update Stop Loss order limits and Market Price Protection (MPP) settings at both Trading Member and user levels
  6. Due Diligence: Exercise care and diligence while placing orders, particularly during volatile sessions
  7. Prevent Erroneous Orders: Implement controls to prevent erroneous orders and trades

Important Dates

  • November 29, 2025 (Saturday): Mock Trading Session for testing revised LPP parameters
  • December 1, 2025 (Monday): Revised LPP parameters become effective

Impact Assessment

Market Impact:

  • Enhanced market integrity and orderly functioning during volatile sessions
  • Improved price discovery process through prevention of unrealistic orders
  • Reduced order book imbalances in equity derivatives segment

Operational Impact:

  • Trading members must update risk management systems and parameters
  • Potential adjustment period for traders adapting to new LPP ranges
  • Index options trading will have significantly wider LPP range (40% vs previous levels)
  • May affect order placement strategies, particularly for deep out-of-the-money options

Risk Management Impact:

  • Stronger pre-trade risk controls across equity derivatives
  • Better protection against erroneous trades
  • Enhanced safeguards during market volatility

Impact Justification

Affects all equity derivatives trading with revised LPP parameters; requires immediate attention from all trading members for compliance and system updates before December 1, 2025.