NISM Certifications · NISM-Series-VIII: Equity Derivatives · Trading Mechanism
Which statement about the price band or operating range for index options and futures on Indian exchanges is most accurate?
Exchanges apply operating ranges or dynamic price bands on derivative contracts so that orders at erroneous prices are rejected. These controls are set by the exchange, not by clearing members, and orders are not restricted to the previous close.
- AExchanges apply dynamic price bands (operating ranges) on contracts to prevent orders at erroneous pricesCorrect
- BThere are no price controls on any derivative contracts
- COrders can be placed only at the previous day's closing price
- DThe band is fixed by the clearing member for each client
Explanation
Exchanges set operating ranges and dynamic price bands for derivative contracts so that orders far from prevailing prices are rejected. They are not set by clearing members and do not fix orders at the previous close.
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