Power trading platform Indian Energy Exchange (IEX) has been included in the Futures & Options ban list starting Monday's trading session. This comes after the stock fell over 10 percent on Friday, extending Thursday's 8 percent decline.

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The two-day drop began on Thursday afternoon after some analysts took note of a June 2 circular, in which the Power Ministry had directed Central Electricity Regulatory Commission (CERC) to undertake the process of consultation and implementation of market coupling in a timely manner. You can read more about what exactly market coupling is, its implications, and what the management of IEX has to say on this here.

You can also read what IEX's rival exchanges have to say on this development here.

So what exactly is the F&O Ban.

When a stock trades in the F&O market, it is subject to a trading limit known as Market-Wide Position Limit or MWPL. The MWPL implies the maximum number of contracts that can be open at any given time. These contracts are a total of all outstanding buy and sell positions.

In case of demand of a particular stock crosses 95 percent of the MWPL, it enters the F&O ban list. As on Friday, IEX's positions stood at 111.38 percent of the MWPL, well above the 95 percent barrier. A stock is generally placed in the F&O ban in order to prevent it from seeing excessive speculative intraday trading.

The biggest takeaway for a stock being in the F&O ban list is that no new positions can be created when a stock in the ban period. Only exiting and squaring off existing positions are allowed when the stock is in the ban list. Therefore, traders cannot create any new positions in IEX starting today, until the stock exits the F&O ban list.

A stock is eligible for exiting the F&O ban list if its demand falls below 80 percent of MWPL. Shares of IEX have declined over 18 percent in the last two trading sessions.

IEX is forming a lower top, lower bottom formation on the daily chart, said Chandan Taparia of Motilal Oswal. "Till the time the stock holds below 128-130 levels, any bounce can be sold into for declines towards levels of 115," he said.

"The stock has been a laggard for the last 15 months," said Sameet Chavan of Angel One. "Technically speaking, we do not seen any near-term relief in prices as the decline is backed by huge volumes. The stock is trading at a two-year low and we advise traders to stay away from the stock till things stabilise," he added.

First Published:Jun 12, 2023 9:05 AM IST