Freak Trade on WebNotes

Market price protection in ATO (Alert Triggers Order)

Sun, 21 Jun 2026 00:00:00 +0000

Market price protection in an Alert Triggers Order (ATO) is the control on Kite that converts the market order placed by the ATO into a limit order if the price moves outside a set protection range, so an order placed automatically when an alert fires cannot fill at a freak price far from the market. An ATO is a Zerodha feature, launched on 16 September 2024, that links a basket of orders to a Kite alert and sends those orders to the exchange the moment the alert is triggered, without further action from the trader.

Market price protection on the Kite order window

Sun, 21 Jun 2026 00:00:00 +0000

Market protection on the Kite order window is a Zerodha feature that fills a market order quickly at the best available price but converts it into a limit order if the price moves outside a set protection range, so a market order cannot fill at a freak price far from the last traded price. A freak trade is an execution at a price far above or below the prevailing market, usually caused by a thin order book or a fat-finger order; market protection caps how far from the current price a market order is allowed to fill.

Price Reasonability Range (PRR) and the execution range

Sun, 21 Jun 2026 00:00:00 +0000

The Price Reasonability Range (PRR), more often called the execution range, is a dynamic band that NSE and BSE set around a contract’s reference price, inside which an order is allowed to match and execute. It exists to prevent freak trades, fills that print far from the prevailing market because a fat-finger order or thin depth let a market order sweep through empty price levels. An order priced or matched outside the range is cancelled rather than executed. It is a market-microstructure control, not a Zerodha rule, and it is distinct from the daily price band .

SL-M orders blocked on BSE (and discontinued for NSE F&O)

Sun, 21 Jun 2026 00:00:00 +0000

SL-M (stop-loss market) orders are blocked on BSE because the exchange discontinued them across its equity, equity derivatives, currency derivatives and commodity segments to safeguard against erroneous orders and to stop orders executing far from the current market price. On the NSE side, the SL-M order type was withdrawn for index options from 27 September 2021 and is not allowed for index and stock option contracts. Both moves target the same hazard: a market order firing into a thin book and filling at a price far from the trigger, a freak trade. Zerodha blocks the order at Kite to match the exchange rule.

Why limit orders placed far from the LTP are rejected on Kite

Sun, 21 Jun 2026 00:00:00 +0000

A limit order rejected for being far from the LTP is a freak-trade safeguard: Zerodha blocks limit orders in stock and index options placed 50% to 150% away from the last traded price, and the exchange separately cancels orders outside a dynamic Price Reasonability Range , because an order priced far from the current market can execute at a level unrelated to fair value and distort price discovery. The fix is to price the order closer to the LTP, or to use a GTT order , which is exempt from the far-from-LTP block.

Freak trade square-off on Zerodha

Wed, 20 May 2026 00:00:00 +0000

When an exchange identifies a freak trade (extremely off-market execution) and decides to annul or reverse it, Zerodha implements the action on the affected client account.

Process

Exchange surveillance flags the trade.
Investigation; if confirmed as a freak trade, exchange annuls.
Affected client accounts are updated:
- Trade reversed.
- Margin / P&L restored.
- Counter-party compensated.

The user typically doesn’t need to take action; the back-office handles it.

For details

See Freak-trade loss penalty for the broader framework.

Freak-trade loss penalty

Wed, 20 May 2026 00:00:00 +0000

A freak trade is an extremely off-market execution: a trade at a price far from the prevailing market. Indian exchanges have a framework for annulling or compensating affected parties for genuinely erroneous trades.

Exchange annulment framework

NSE / BSE rules:

Threshold: Trades executed at prices significantly deviating from prevailing price (specific thresholds defined).
Investigation: Exchange surveillance reviews; verifies if a genuine error.
Annulment: If confirmed, trade is annulled.
Compensation: Affected counter-parties compensated per the framework.

When the framework applies

Genuine freak trades: