What is the difference between F&O Execution Range and Circuits Limits?
NSE has two types of price limits set in the system.
1. F&O Execution Range was introduced in 2014 to protect traders from high impact costs while trading illiquid option contracts. All F&O contracts will have a live reference price and market orders will only get executed if there are orders within this range. The range is defined in the following table:
|Segment||Reference Price (Rs.) ||% of Reference Price ||Minimum absolute Range (Rs.)|
|Options||0.05 to 50||-||20|
Reference price for each contract shall be computed as follows
- At market open – Theoretical price derived from the underlying price.
- During Trading Hours – 1 minute simple average of trade prices, the reference price shall be revised throughout the day on a rolling basis at 1-minute intervals
2. Circuit Limits- These limits are set on all F&O contracts and stocks to ensure no manipulation in prices. When the circuit limits are hit, it alerts NSE and NSE have to manually relax these limits.
Unlike the execution range, the circuit limits are static unless the upper or the lower circuit limit is hit.
Read more on circuit limits here.