What is market price protection in Alert Triggers Order (ATO)?
Alert Trigger Orders (ATO) is a feature that places a linked basket of orders when an alert is triggered. Market price protection in an ATO refers to an order that executes immediately at the best available price while reducing the risk of price variation. Unlike a regular market order, which can be filled at any price, market price protection converts a market order into a limit order if the price moves outside a set range, i.e. protection range. This helps avoid execution at a price that differs greatly from the intended one, offering protection against extreme price fluctuations. If the market moves outside of the protection range, there’s a risk that not all of the shares the client wishes to buy or sell will be executed. The remaining quantity will remain open as a limit order.
The protection range is calculated based on the current market price when the order is placed. For instance, the protection might be set to a certain percentage above the current bid (for a buy order) or below the current ask (for a sell order). If the order cannot be filled immediately within the protection range, it will be converted to a limit order at the calculated protection price.
The market protection percentage is calculated as per the below table:
| Security type | Price range (in ₹) | Percentage of the Last Traded Price (LTP) |
| EQ and FUT | Less than 100 | 2% |
| EQ and FUT | Between 100 and 500 | 1% |
| EQ and FUT | More than 500 | 0.5% |
| OPT | Less than 10 | 5% |
| OPT | Between 10 and 100 | 3% |
| OPT | Between 100 and 500 | 2% |
| OPT | More than 500 | 1% |
Example Scenario
Consider that a stock is currently trading at ₹90.
- Buy order: A client places a market price protection buy order for 100 shares.
- Protection range: The system establishes a protection range, i.e., 2% above the current price since the price is less than 100. As a result, the protection limit price is set at ₹91.80.
- Order execution: The order attempts to execute immediately, buying shares at ₹91.80 or below, ensuring the best available price within that limit.
- Limit order placed: If the order cannot be filled for 100 shares within this range, the remaining quantity will remain open as a limit order at ₹91.80.
Advantages of market price protection in ATO
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Prevents price impact:
By capping the execution price, it ensures that the client does not pay more than a specified price for a buy order or receive less than a specified price for a sell order.
- Flexibility: Combines market orders with the price control of limit orders, giving clients more flexibility in managing trade executions.
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