The National Stock Exchange (NSE) will implement changes to the order-to-trade ratio (OTR) framework for the equity derivatives options segment starting April 6, aligning with SEBI guidelines. Orders falling within a range of (+/-)40% of the last traded price (LTP) of the options premium or (+/-)Rs 20, whichever is higher, will now be exempt from penalties related to high OTR.
This adjustment represents a significant relaxation from the previous standard, where only orders within 0.75% of the LTP were excluded from OTR calculations, resulting in a narrower exemption band. The OTR framework for the equity derivatives futures segment and the cash segment remains unchanged, with orders within 0.75% of the LTP continuing to be exempt from OTR computations.
According to the SEBI circular from February, algorithmic orders placed by designated market makers for market-making activities will not be factored into OTR calculations, offering a specific exemption within the framework. The OTR metric is crucial for monitoring excessive order placement and ensuring the smooth functioning of the market.
The revisions were made following input from stock exchanges, discussions with market participants, and recommendations from the SEBI’s Secondary Market Advisory Committee (SMAC). A mock trading session to test the updated functionality took place on March 14. All existing penal charges, actions, and modalities under the OTR framework will remain as per earlier circulars.
