Price Reasonability Range (PRR) is a functionality the exchange implemented in the derivatives segment to improve the exchange's pre-trade risk management framework (WEB). The primary purpose of PRR is to prevent potential market abuses and errors caused by significant price deviations. This helps support authentic price discovery and protect your interests as an investor.
Within the Price Reasonability Checks (PRC) functionality, the system checks each new limit order's price against the dynamically determined PRR. This calculation relies on real-time reference prices, typically sourced from best bid/offer prices for each contract or security. The system ensures that incoming limit order prices reasonably align with current market prices.
Key features of Price Reasonability Check (PRC)
- It applies to incoming limit orders.
- It checks incoming limit order prices against the current PRR.
- The system dynamically computes PRR using real-time reference prices, such as best bid/offer prices or, if unavailable, the Last Trade Price (LTP) or the previous closing price.
- The system adapts in real time, switching between reference prices based on the order book's conditions.
- The exchange also uses existing price bands for risk management, ensuring that PRR remains within predefined thresholds for each contract/security.
- PRC applies to all futures and option contracts in the equity derivatives segment, except for calendar spreads and paired option contracts.
- The system calculates PRR as an absolute value, and it corresponds to specific order price categories.
You can find PRR slabs for BANKEX and SENSEX on the BSE circular (WEB) on Price Reasonability Range.