Description

BSE introduces new pre-trade risk controls for Stop Loss Limit orders in equity derivatives, implementing price range checks between trigger and limit prices effective January 19, 2026.

Summary

BSE is implementing enhanced pre-trade risk control measures for Stop Loss Limit (SL-Limit) orders in the Equity Derivatives segment to strengthen risk management and ensure orderly trading. The new mechanism introduces validation checks on the difference between trigger price and limit price, with specific permissible ranges based on instrument type and price levels. Orders exceeding these ranges will be rejected. The changes become effective for live trading from January 19, 2026, with mock trading testing available on January 17, 2026.

Key Points

  • SL-Limit orders must satisfy a new price range validation: Abs(limit price – trigger price) <= ‘X% * trigger price’ (subject to minimum absolute range)
  • For FUTIDX: If trigger price > ₹10,000, permissible range is 2% of trigger price; if ≤ ₹10,000, minimum absolute range is ₹200
  • For OPTIDX: If trigger price > ₹50, permissible range is 20% of trigger price; if ≤ ₹50, minimum absolute range is ₹10
  • Validation applies to both new order entries and order modification requests
  • Rejected orders will receive error message: “Stop limit order price range check failed”
  • Trading members must test their systems adequately before implementation

Regulatory Changes

New Pre-Trade Validation Rules

The Exchange has introduced mandatory price range checks for SL-Limit orders with the following parameters:

FUTIDX (Index Futures):

  • Trigger price ≤ ₹10,000: Minimum absolute range of ₹200 applies
  • Trigger price > ₹10,000: Maximum 2% difference between trigger and limit price

OPTIDX (Index Options):

  • Trigger price ≤ ₹50: Minimum absolute range of ₹10 applies
  • Trigger price > ₹50: Maximum 20% difference between trigger and limit price

Scope of Application

  • Applies to all incoming SL-Limit order entries
  • Applies to SL-Limit order modification requests
  • Orders/modifications failing validation will be immediately rejected

Future Modifications

The Exchange reserves the right to review and implement further improvements or changes based on market experience and participant feedback.

Compliance Requirements

For Trading Members

  1. System Updates: Ensure trading systems are updated to comply with new SL-Limit order validation rules
  2. Testing: Mandatory participation in mock trading session on January 17, 2026 to test system compatibility
  3. Adequate Testing: Conduct thorough internal testing before live implementation
  4. Error Handling: Implement proper error handling for rejection message “Stop limit order price range check failed”
  5. Risk Controls: Continue to exercise due care and diligence while placing orders as per existing Exchange circulars and advisories
  6. Client Communication: Inform clients about the new order validation rules to prevent order rejections

Important Dates

  • January 14, 2026: Circular issuance date (Notice No 20260114-28)
  • January 17, 2026 (Saturday): Mock trading session available for testing
  • January 19, 2026 (Monday): Enhancement goes live for actual trading

Impact Assessment

Operational Impact

Trading Members: High impact requiring immediate system changes and testing. Trading members must modify their order management systems to incorporate the new validation logic before January 19, 2026. Failure to adapt will result in SL-Limit order rejections.

Market Participants: Traders using stop loss limit orders in equity derivatives will need to adjust their order placement strategies to ensure compliance with the new price range requirements. Orders with wider spreads between trigger and limit prices may be rejected.

Risk Management Benefits

  • Reduces potential for erroneous orders with extreme price differences
  • Enhances pre-trade risk controls in derivatives segment
  • Promotes orderly trading by preventing orders with unrealistic price ranges
  • Protects against potential fat-finger errors and system glitches

Market Segment Affected

Equity Derivatives segment only - specifically FUTIDX and OPTIDX instruments. Cash equity segment and other derivative instruments are not affected by these changes.

Technical Considerations

The two-day window between mock trading (January 17) and live implementation (January 19) is tight. Trading members must prioritize system testing and be prepared for potential order rejections if validation rules are not properly implemented in their systems.

Impact Justification

Critical system changes affecting all derivative trading members requiring mandatory system testing and implementation by January 19, 2026. Non-compliance will result in order rejections.