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SEBI Amends Framework for Dynamic Price Bands for Scrips in Derivatives Segment

Published on May 27, 2024
Current Context: The Securities and Exchange Board of India (SEBI) has recently amended the framework for dynamic price bands for scrips in the derivatives segment.
SEBI Amends Framework for Dynamic Price Bands for Scrips in Derivatives Segment
  • Here are the key enhancements introduced:
    • Enhanced Conditions for Flexing Price Bands: The conditions for flexing the price bands have been made more stringent to prevent sudden and erratic price movements. The number of trades required to trigger a flex has been increased from 25 to 50, the number of unique UCCs from 5 to 10, and the number of trading members on each side from none specified to 3.
    • Alignment Between Underlying and Futures Contracts: The new rule mandates that once conditions for flexing are met in either the cash market or current month futures contracts, the price bands for the scrip and all its futures contracts across all exchanges will be flexed simultaneously after the cooling-off period.
    • Adjusted Cooling-Off Period and Flexing Percentage: Initially set at 15 minutes, the cooling-off period will now vary based on the number of flexes that occur. The first two flexes maintain 15 minutes, the next two increase to 30 minutes, and any subsequent flexes extend to 60 minutes. Additionally, the percentage increment for flexing will decrease from 5% to 3% and eventually to 2% as more flexes occur.
    • Sliding Price Bands: A new sliding mechanism has been introduced, where both the upper and lower price bands move in response to flexing in one direction.

Question:

1. What is the new minimum number of trades required to trigger a flex in the price bands for scrips in the derivatives segment?

  • A) 10
  • B) 50
  • C) 25
  • D) 75
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