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SEBI has proposed changes to the price bands for equity derivatives

by Koushik Gope
Published: Last Updated on 1 comment
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The Securities and Exchange Board of India (SEBI) has proposed changes to the price bands for equity derivatives. The changes are aimed at curbing excessive price volatility in the market.

Under the current rules, there are two types of price bands for equity derivatives:

Dynamic price bands: These bands are based on the previous day’s closing price. The band width is 2% for Nifty and 1% for individual stocks.

Fixed price bands: These bands are set at 10% for Nifty and 5% for individual stocks.

SEBI has proposed to replace the dynamic price bands with fixed price bands of 5% for Nifty and 2.5% for individual stocks. The regulator has also proposed to introduce a new mechanism called “call auction” for stocks that breach the price band. Under the call auction mechanism, trading in a stock will be suspended for a period of 15 minutes and then reopened after a fresh auction is conducted.

The changes proposed by SEBI are expected to have a significant impact on the equity derivatives market. The fixed price bands will reduce the risk of excessive price volatility, while the call auction mechanism will provide investors with an opportunity to exit a stock if they feel that the price is moving too far too fast.

The changes proposed by SEBI are still in the consultation phase and will be open for public feedback for a period of 30 days. The final decision on the changes will be taken by SEBI after considering the feedback received from the public.

Here are some of the key points of the proposed changes:

  • The current dynamic price bands will be replaced with fixed price bands of 5% for Nifty and 2.5% for individual stocks.
  • A new mechanism called “call auction” will be introduced for stocks that breach the price band. Under the call auction mechanism, trading in a stock will be suspended for a period of 15 minutes and then reopened after a fresh auction is conducted.
  • The changes proposed by SEBI are still in the consultation phase and will be open for public feedback for a period of 30 days. The final decision on the changes will be taken by SEBI after considering the feedback received from the public.

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1 comment

Vinay May 21, 2023 - 10:56 pm

Not suitable

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