Placing Orders at Unrealistic Prices

Description

BSE issues advisory urging market participants to refrain from placing orders at unrealistic prices that may distort order books and disrupt market equilibrium.

Summary

BSE has issued Notice No. 20260107-43 dated January 07, 2026, addressing the issue of orders being placed at unrealistic prices that are significantly away from Last Traded Price (LTP), Reference price, or Theoretical Price. The exchange warns that such orders may distort order books and disrupt market equilibrium, impacting market integrity. Members are required to implement appropriate systems and controls, including for orders placed through Algorithms, IBT (Internet Based Trading), and STWT (Single Touch Without Touch). Non-compliance may attract regulatory action under Exchange regulations.

Key Points

• Exchange has observed instances of orders placed at unrealistic prices significantly away from LTP/Reference price/Theoretical Price
• Such orders can distort the order book and disrupt market equilibrium
• Market integrity is impacted by these unrealistic order placements
• Members must exercise due care and diligence while placing orders
• Appropriate systems and controls must be implemented for all order types
• Controls apply to orders placed through Algorithms, IBT, and STWT
• Applies to both own account trading and client orders
• Non-compliance will attract regulatory action

Regulatory Changes

This circular reinforces existing pre-trade risk control requirements and emphasizes stricter enforcement. While not introducing new regulations, it signals heightened surveillance and potential regulatory action against members who fail to implement adequate controls on order placement at unrealistic prices.

Compliance Requirements

• Market participants must refrain from placing orders at unrealistic prices
• Implement robust pre-trade risk control systems to prevent orders at prices significantly away from LTP/Reference price/Theoretical Price
• Ensure controls cover all order placement channels including:
  • Algorithmic trading systems
  • Internet Based Trading (IBT)
  • Single Touch Without Touch (STWT) orders
• Apply controls to both proprietary trading and client orders
• Exercise due care and diligence in all order placement activities
• Review and strengthen existing risk management frameworks

Important Dates

• Notice Date: January 07, 2026
• Effective Date: Immediate (no transition period mentioned)

Impact Assessment

Market Impact: This advisory affects all trading members and their order placement practices. Members must review and potentially upgrade their pre-trade risk management systems to ensure compliance.

Operational Impact: Trading firms need to implement or strengthen price validation checks across all trading platforms, including algorithmic systems. This may require system enhancements and additional monitoring capabilities.

Compliance Risk: Members face potential regulatory action for non-compliance, which could include penalties, restrictions, or other disciplinary measures under Exchange regulations.

Participants Affected: All BSE trading members, including those engaged in algorithmic trading, providing IBT facilities, or offering STWT services to clients.

Impact Justification

Critical advisory addressing market integrity concerns with potential regulatory action for non-compliance. Affects all market participants and their order placement systems.