Bse To Introduce Stop-Loss Facility

The Bombay Stock Exchange (BSE) will introduce the stop-loss facility on the BOLT screen from March. This step is line with the Securities and Exchange Board of India (Sebi) directive calling on stock exchanges to implement a stop loss facility.

Confirming the move, a top BSE governing board member said the systems department of the exchange were working out the modalities of the facility.

Once implemented, the stop-loss option will feature on the screen at the time of putting in an order. Currently, only the National Stock Exchange of India (NSE) has this facility.

The facility is essentially meant for small investors and traders who cannot track scrip prices on a continuous basis. The stop-loss system works as follows:

If an investor has taken a long position of 100 shares in a scrip at Rs 100 and he does not wish to suffer a loss of more than Rs 200 at any point of time -- He instructs the broker who in turn sets a stop loss at Rs 98.

In case the scrip price falls to Rs 98, the stop-loss is triggered and the shares are automatically sold.

Thus the investor does not lose more than Rs 2 per share. The same process is implemented on the selling side. If an investor has short sold 100 shares of a scrip at Rs 98 -- In case the investor does not want to lose more than Rs tw per share, the broker can put a stop loss at Rs 100.

Once the price touches Rs 100, the position gets automatically covered.

This facility is helpful whenever there is a large hit sell (sell at any price) or take buy (buy at any price) orders on the screen which lead to sharp price movements.