BSE and NSE have put a price band of 10 per cent on share movements of four firms — Essar Oil, Suzlon Energy, Educomp and CORE Education — as part of preventive surveillance measures.

The price band will be applicable for trading in the four stocks with effect from April 2. The decision to limit any upward or downward movement in their share prices to a maximum of 10 per cent has been taken by the stock exchanges in consultation with market regulator SEBI.

In separate notices, NSE and BSE said that a fixed price band of 10 per cent on these four stocks is being imposed as part of a “preventive surveillance measure and to ensure market safety and safeguard the interest of the investors”.

With an aim to prevent any systemic risks arising out of erroneous trades or stock manipulations, the market regulator SEBI late last year asked the stock exchanges to put in place a system for ‘dynamic price bands’.

These dynamic price bands, which are generally referred to as dummy filters or operating range, prevent acceptance of orders for execution that are placed beyond the price limits set by the stock exchanges.

Such dynamic price bands are relaxed by the stock exchanges as and when a market-wide trend is observed in either direction — a bullish or bearish price movement.

The stock exchanges can also convert these dynamic price bands into ‘fixed price bands’, if required by the trading pattern of the stocks under review.

In October last year, a set of erroneous orders led to the Nifty briefly crashing by over 15 per cent following which SEBI had issued guidelines that required the bourses to set the dynamic price bands at 10 per cent of the previous closing price.

The dynamic price band is fixed for securities on which derivatives products are available, index and stock futures and also on stocks included in indices on which derivatives products exist.

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