Bracket order (BO), legacy Zerodha feature
A bracket order (BO) was an advanced intraday order type formerly available on Kite, Zerodha’s trading platform. It enabled a trader to simultaneously place three linked legs: an entry order, a profit target, and a stop-loss with an optional trailing feature. The bracket order was discontinued by Zerodha in October 2020 following changes to SEBI margin norms and was not restored thereafter.
This article documents the bracket order for historical reference and for the benefit of traders who encounter it in older documentation, platform guides, or community discussions.
Structure of a bracket order
A bracket order comprised three simultaneous legs:
- Entry leg: A limit order to open the intraday position at a specified price.
- Target leg: A limit order to close the position at a profit target, placed as a sell limit (for long) or buy limit (for short) at a price better than the entry.
- Stop-loss leg: An SL-M (Stop Loss Market) order with a specified trigger price and, optionally, a trailing stop-loss amount.
The three legs were inseparably linked. When any one leg was filled or triggered, the other two were automatically cancelled. This three-leg structure is known in international markets as a “bracket” because the trade is bracketed between a target above and a stop below (for a long position).
Trailing stop-loss
The trailing stop-loss was the most distinctive feature of the bracket order. The trader specified a trailing amount in absolute price terms (not percentage). As the position moved in the trader’s favour, the stop-loss trigger automatically moved up by the same increment. For example:
- Entry: Rs 100 (long)
- Stop-loss trigger: Rs 98 (trailing amount: Rs 2)
- Target: Rs 106
If the stock rose to Rs 103, the trailing stop would automatically move to Rs 101 (Rs 103 minus the Rs 2 trailing amount). If the stock then fell to Rs 101, the stop would fire. If the stock continued rising to Rs 106, the target leg would fill and the stop would be cancelled.
This mechanism allowed traders to lock in profits progressively without manual intervention, which was the primary appeal of bracket orders over cover orders.
Margin benefit
Like cover orders, bracket orders carried a reduced margin requirement compared to standard MIS intraday orders. The margin reduction was calculated based on the maximum possible loss defined by the stop-loss range, since the stop-loss leg was compulsory and could not be independently cancelled.
Discontinuation in 2020
Zerodha discontinued bracket orders on 1 October 2020. The primary stated reason was the implementation of SEBI’s new peak margin framework, which came into full effect in phases from September 2020. The new peak margin rules required brokers to collect intraday margins based on peak positions during the day rather than end-of-day positions, removing much of the economic rationale for the reduced-margin bracket order structure.
In practice, the bracket order’s reduced margin was predicated on the assumption that the stop-loss would prevent losses beyond a defined range. The peak margin framework effectively required full margins to be collected regardless, making the operational complexity of maintaining three linked legs difficult to justify.
After discontinuation, Zerodha recommended traders transition to:
- Cover orders for mandatory-stop-loss intraday trades.
- GTT orders for multi-day conditional orders.
- Manual management of target and stop-loss legs using separate limit and SL orders.
Comparison with cover orders and current alternatives
| Feature | Bracket order (BO) | Cover order (CO) | Manual target + SL |
|---|---|---|---|
| Entry type | Limit only | Market or limit | Any |
| Profit target leg | Yes (linked) | No | Manual separate order |
| Stop-loss | Trailing SL-M | Fixed SL-M | Separate SL or SL-M |
| Reduced margin | Yes | Yes | No (standard MIS margin) |
| Current availability | Discontinued (2020) | Active | Active |
| Auto-cancel on fill | Yes (all three legs) | Yes (entry + stop) | Manual |
Legacy references and community documentation
Despite being discontinued in 2020, bracket orders remain referenced in a significant body of online trading guides, Zerodha Varsity modules, and third-party trading courses that were written before October 2020. Traders encountering the term “BO” in older Kite documentation or community discussions should note that this order type is no longer available on the platform.
Third-party API integrations built for Zerodha’s Kite Connect API that referenced the “BO” product code ceased to function after discontinuation. The Kite Connect API documentation was updated accordingly.
International context
Bracket orders are a well-established concept in international electronic trading. The Chicago Mercantile Exchange (CME) and Interactive Brokers, among others, offer bracket order functionality. The Indian market’s bracket order, as implemented by Zerodha and a few other brokers in the 2010s, was modelled on these international implementations but adapted to the exchange-level order routing constraints of NSE and BSE.
Regulatory context
The bracket order’s discontinuation was a direct consequence of SEBI’s peak margin circular (SEBI/HO/MRD/DP/CIR/P/2020/175), which restructured intraday margin collection requirements for all market participants. The circular required brokers to collect margins based on the highest intraday peak position, undermining the margin-efficiency rationale for reduced-margin order types.
References
- SEBI circular on peak margin requirements, SEBI/HO/MRD/DP/CIR/P/2020/175, dated 2020-09-17.
- Zerodha support article: “Bracket orders and cover orders, important changes”, support.zerodha.com (archived).
- NSE circular on peak margin implementation, NSE/MEM/2020 series.
- Zerodha blog: “Bracket orders discontinued from October 1st”, zerodha.com/z-connect (2020).
- Kite Connect API changelog, kite.trade/docs (October 2020 release notes).