According to the NSE Circular dated March 26, 2021 “in order to further strengthen the order level surveillance mechanism, there shall be an additional order based surveillance measure to deter persistent noise creators i.e. excessive order modifications/cancellations with an intent to avoid execution.”

Why Is It Required?

The SEBI has introduced such measures to reduce the Quote Stuffing and Spoofing in order to manipulate scrip price and volume which are aimed at deceiving other traders.

Quote Stuffing: Placing large orders and not executing them to manipulate market depth data.

Spoofing: Placing large orders at different price points and creating artificial demand and supply.

How Will It Work?

The additional Order Based Surveillance Measure came into effect on April 5 and shall be actionable on May 5, based on a 20 trading day window. This measure is applicable to traders based on the 3 different parameters mentioned below.

  • Instances of a high order to trade ratio
  • Instances of higher-order modifications
  • Instances of a high percentage of order modification leading to lower-order execution priority

If the system detects any of these activities it will be considered a one instance count. In simple words, at least 1 order should be executed for 50 orders placed or modified. Based on the count of instances over a period of 20 trading days, exchanges will determine the penalty. If the count exceeds 99 on a rolling 20-trading day basis, the client trading will face trading disablement for 15 minutes. Any additional instance of repetitive violation on consecutive trading days will lead to trading disablement for 15 more minutes up to a maximum of two hours. 

Trading suspension for the first time will be 15 minutes of trading which will extend to a maximum of 2 hours (in the normal continuous market) at PAN Level across the Exchanges in Equity & Equity Derivative Segment.

Repetitive violation on consecutive trading days will result in trading suspension N (times) x 15 (minimum) and 2 hours (maximum).

1st Time 15 minutes
2nd Time (2×15) = 30 minutes
3rd Time (3×15) = 45 minutes
4th Time (4×15) = 1 hour
5th Time (5×15) = 1 hour 15 minutes
6th Time (6×15) = 1 hour 30 minutes
7th Time (7×15) = 1 hour 45 minutes
8th Time (8×15) = 2 hours

How Does It Impact You?

  • It will attempt to put a stop to artificial buy and sell orders that involves excessive modification and cancellation to avoid order execution.
  • Reduce manipulation of market depth data and ensure that scrip price and volume change based on collective supply and demand of all market participants.
  • Retail traders have a better potential to analyse the market based on a real rather than an artificial scenario.
  • It will negatively impact the manipulative activities of market manipulators.

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