SEBI eyes fat‑finger fixes

India’s markets regulator is preparing new guardrails for options trades after erroneous orders sent option prices lurching across exchange order books. (moneycontrol.com) The Securities and Exchange Board of India is discussing pre-trade controls and “dynamic narrow price bands” with exchanges, brokers and other market participants, according to a report published April 15, 2026. The proposal would cover equity options and commodity options. (moneycontrol.com) A fat-finger trade is a mistaken order, usually a wrong price or size, that can hit the market before a broker or exchange stops it. In options, where many contracts trade at low absolute prices, one bad order can yank quoted prices far away from where the underlying stock or commodity is trading. (moneycontrol.com) Under the draft approach, the opening band for an option would be set from the previous day’s close. If a contract was illiquid or did not trade, the exchange could use a theoretical price built from factors such as the underlying asset’s past moves, delta, volatility, dividends, interest rates and time to expiry. (moneycontrol.com) Those bands would not stay fixed through the day. The report said exchanges may be asked to widen or shift them automatically when the underlying cash or futures price moves sharply in one direction, so valid trades can still go through without leaving the market open to stray prints. (moneycontrol.com) This is not the first time the regulator has used price bands to deal with sudden derivatives moves. On May 24, 2024, the Securities and Exchange Board of India tightened the framework for dynamic price bands in the derivatives segment and raised the thresholds for “flexing” those bands during trading. (sebi.gov.in) Business Standard reported at the time that the 2024 changes were aimed at sudden price moves and fat-finger errors, and that flexing meant shifting the permitted trading range in the direction of the market once preset conditions were met. The rollout was scheduled in phases starting August 19 and October 21, 2024. (business-standard.com) The regulator has also been tightening the wider equity derivatives rulebook. On May 29, 2025, it issued a separate package on risk monitoring that changed how open interest is measured and revised position-limit rules in the equity derivatives segment. (sebi.gov.in) That push came after the regulator’s own study found that 93 percent of individual traders in equity futures and options lost money between fiscal 2022 and fiscal 2024, with aggregate losses above ₹1.8 lakh crore. The new fat-finger plan targets market plumbing rather than speculation, but it fits the same pattern of closer oversight in India’s options market. (sebi.gov.in; sebi.gov.in) For traders, the immediate effect would be simpler than the mechanics: fewer absurd option prints, fewer orders executed at obviously wrong prices, and a smaller chance that one erroneous trade distorts the screen for everyone else. The proposal is still under discussion, so the final design now rests with the exchanges and the Securities and Exchange Board of India. (moneycontrol.com)