New NSE OTR framework for options to take effect from April 6
The NSE has revised the OTR framework for equity derivatives options, easing norms by widening the exemption range. The changes, aligned with SEBI guidelines, will take effect from April 6, while existing rules for futures and cash segments remain unchanged
Mumbai: The National Stock Exchange (NSE) has revised the order-to-trade ratio (OTR) framework for the equity derivatives options segment, with the changes set to come into effect from April 6, in line with SEBI guidelines issued earlier this year.
Under the revised criteria, orders placed within a range of (+/-)40 per cent of the last traded price (LTP) of the options premium or (+/-)Rs 20, whichever is higher, will be exempt from the framework for imposing penalties on high OTR.
This marks a significant relaxation compared to the earlier norm, under which only orders within 0.75 per cent of the LTP were excluded from OTR computation, resulting in a relatively narrow exemption band.
The exchange also clarified that no changes have been made to the OTR framework for the equity derivatives futures segment and the cash segment. In these segments, orders entered or modified within 0.75 per cent of the LTP will continue to remain exempt from OTR calculations.
As per the SEBI circular issued earlier in February, algorithmic orders placed by designated market makers for market-making activities will not be considered in the computation of OTR, providing a specific carve-out within the framework.
The OTR metric tracks the ratio of total orders placed, including modifications and cancellations, to the number of trades executed by a trading member.
It is used by exchanges to monitor excessive order placement and ensure orderly market functioning.
The changes follow representations from stock exchanges, consultations with market participants and recommendations of the SEBI’s Secondary Market Advisory Committee (SMAC).
In addition, a mock trading session for the revised functionality was conducted on March 14.
The NSE said all existing penal charges, actions and other modalities under the OTR framework, as specified in earlier circulars, will remain unchanged.