What does the error “The order was cancelled by the exchange because the price is outside the current allowed limit price protection range" mean?
“When placing a limit order in an index/stock options or index/stock futures contract, if the specified price falls outside the Limit Price Protection (LPP) range, the order is rejected. The rejection reason is stated as: “”The order was cancelled by the exchange because the price is outside the current allowed limit price protection range.””
Here’s what you need to know about LPP:
Dynamic Nature of LPP:
The LPP range is dynamic, changing with fluctuations in the price of the contract. Exchanges implement LPP to fortify pre-trade risk control measures, preventing extreme trades that could execute at significantly above or below the prevailing market price.
LPP Applicability:
LPP is applicable to both limit orders and Stop loss – Limit order (SL-L) orders in stock and index F&O contracts.
Guidelines for Placing Orders:
Limit Order: Ensure that the limit price entered falls within the LPP range. Stop Loss – Limit Order (SL-L): When placing an SL-L order, make sure both the limit and trigger prices are within the LPP range.
Calculation of LPP Range:
For options with a premium value higher than ₹50, the range is +/- 40%. For options with a premium value lower than ₹50, the range is +/- ₹20 (absolute value, not percentage).
Example Scenario:
If the premium of a Nifty options contract is trading at ₹75 (above ₹50), the LPP range is +/- 40%. Therefore, the range is ₹30.
Upper range: ₹75 + ₹30 = ₹105
Lower range: ₹75 – ₹30 = ₹45
The limit or SL-Limit order should be placed within this range (₹45 to ₹105).
However, if the premium is trading at ₹25 (below ₹50), the LPP range is +/- ₹20.
Upper range: ₹25 + ₹20 = ₹45
Lower range: ₹25 – ₹20 = ₹5
The limit or SL-Limit order should be placed within this range (₹5 to ₹45). Ensure compliance with these guidelines to prevent order rejections. For more information on the computation of the LPP range, refer to the NSE FAQs
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