Circuit Filter in Indian Stock Market is an exchange-defined price range in which a stock is traded on a given day. Exchange provides a pre-defined upper and lower price for each stock on daily basis.
The circuit filter for a stock is defined every day based on the previous day's closing price. They are numeric percent limits set on individual scripts. Exchanges define circuit filters in 5 categories including 2%, 5%, 10%, 20%, and no circuit filter.
The circuit filter allows trading only in the given range e.g. +- 20% to avoid order entry errors.
There is no circuit filter defined for the stocks which are being traded in F&O. However, to prevent investors to enter accidentally wrong prices in these stocks, the Exchange has set the dummy circuit (dynamic operating range) filter (operating range) at 10%.
Flexing is a process of dynamically defining the price range for stocks for which derivatives products are available when the Last Traded Price approaches the upper or lower band (10% initially). It's an automated process defined by rules. The pricing is relaxed by 5% at a time in the direction of the price movement during the day. Click here to read more about Flexible Circuit Filters
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