Description
BSE warns market participants against placing orders at unrealistic prices that distort order books and disrupt market equilibrium, urging implementation of appropriate controls.
Summary
BSE has issued a notice regarding placing orders at unrealistic prices, emphasizing that market participants must exercise due care and diligence. The Exchange has observed instances where orders placed significantly away from Last Traded Price (LTP), Reference price, or Theoretical Price distort order books and disrupt market equilibrium, impacting market integrity. Members must implement appropriate systems and controls for all order types including algorithmic trading, IBT, and STWT. Non-compliance may result in regulatory action.
Key Points
- Exchange has been issuing notices and advisories on Pre-Trade Risk Controls
- Orders placed at unrealistic prices or significantly away from LTP/Reference price/Theoretical Price distort order books
- Such orders disrupt market equilibrium and impact market integrity
- Members must implement appropriate systems and controls
- Controls must cover orders placed through Algorithms, IBT (Internet Based Trading), and STWT (Single Touch Wireless Trading)
- Controls apply to both proprietary trading and client orders
- Non-compliance may attract regulatory action under Exchange regulations
Regulatory Changes
No new regulatory changes introduced. This is a reminder and enforcement notice regarding existing Pre-Trade Risk Control requirements.
Compliance Requirements
- Market participants must refrain from placing orders at unrealistic prices
- Implement appropriate systems and controls to prevent orders at prices significantly away from market prices
- Ensure controls cover all order types: manual orders, algorithmic orders, IBT orders, and STWT orders
- Apply controls to both proprietary account trading and client orders
- Exercise due care and diligence while placing all orders
Important Dates
- Notice Date: January 7, 2026
- Effective Date: Immediate
Impact Assessment
Market Impact: High - Affects all market participants including brokers, traders, and algorithmic trading firms. Orders at unrealistic prices can distort price discovery mechanisms and create artificial market movements.
Operational Impact: Medium - Members need to review and strengthen their order placement systems and pre-trade risk management controls, particularly for algorithmic and automated trading systems.
Compliance Impact: High - Non-compliance may result in regulatory action by BSE, including potential penalties, fines, or trading restrictions as per Exchange regulations.
Technology Impact: Medium - Firms may need to enhance their trading infrastructure to implement additional price validation checks and circuit breakers to prevent orders at unrealistic prices.
Impact Justification
Critical market integrity issue affecting all market participants; non-compliance may attract regulatory action