The National Stock Exchange will extend the concept of reference price and execution range to India VIX Futures and Nifty long-term options contracts only if it works out well for other contracts in the futures and options (F&O) segment, according to Chitra Ramkrishna, MD & CEO, NSE.

Speaking on the sidelines of NSE’s Futures Tech summit in Mumbai on Tuesday, Ramkrishna said quite a few markets worldwide are already experimenting.

To dissuade brokers from placing orders significantly away from the market price and benefit from any erroneous order entry from another entity on the exchange platform, an NSE circular on F&O on April 11, 2014, said:

“Orders shall be matched and trades shall take place only if the trade price is within the reference price and execution range.”

The circular will come into effect on May 5. However, trade execution range would not apply to India VIX futures and Nifty long-term option contracts.

Reference price computation The circular specified the manner in which reference price would be computed and provided a table outlining the execution range within which orders would be executed into trades.

The reference price at market open will be the theoretical price based on the price of the underlying index or stock.

On commencement of trading, the reference price would be the average of traded prices in the contract during the last five minutes. For contracts that traded in the last five minutes, the reference price would be revised at intervals of one minute. For other contracts, the reference price will be the theoretical price based on the latest available underlying price and updated every 30 minutes.

The execution range on both sides for futures contracts is 5 per cent of the reference price.

For options, the minimum absolute range is ₹5 for a reference price of up to ₹25.

For reference price of above ₹25.05 and up to ₹100, the range is 20 per cent and a minimum absolute range of ₹10. For above ₹100, it is 10 per cent and ₹20.

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