The Securities and Exchange Board of India (SEBI) has revised its order-to-trade ratio (OTR) rules, excluding orders within plus or minus 40% of the option premium or ₹20, whichever is higher, from penalty calculations. | Photo Credit:
The Securities and Exchange Board of India (SEBI) has relaxed its order-to-trade ratio (OTR) norms by excluding orders placed within plus or minus 40 per cent of the option premium, or within ₹20, whichever is higher, from penalty calculations.
OTR is a surveillance measure used by stock exchanges to curb excessive order placement and cancellations, particularly in algorithmic and high-frequency trading, by imposing economic disincentives on trading members with very high order volumes relative to executed trades.
Market maker exemption
SEBI has also decided that algorithmic orders placed by designated market makers as part of their market-making activity will not be counted towards OTR. Market makers are required to continuously quote buy and sell prices to provide liquidity in securities and contracts, a process that naturally involves frequent order updates.
For other segments, including the cash market and derivatives beyond equity options, the existing exemption remains unchanged. Orders placed within 0.75 per cent of the last traded price will continue to be excluded from OTR penalty calculations.
Broader framework
The broader OTR framework will still apply across equity and derivative segments, including orders placed under liquidity enhancement schemes. Only the newly specified option price bands and market-making algorithmic trades have been carved out.
SEBI has directed stock exchanges to amend their by-laws, rules and regulations to implement the revised framework and to disseminate the changes to market participants through their websites.
The updated norms will come into effect from April 6, 2026.
Published on February 4, 2026