New Delhi: Markets regulator Sebi has introduced a new framework for monitoring intraday positions in equity index derivatives, aimed at curbing risks from large exposures and ensuring orderly trading.
According to a circular issued late Monday, Sebi has capped the net intraday position in index options at Rs 5,000 crore per entity, compared with the end-of-day limit of Rs 1,500 crore.
The gross intraday position has been set at Rs 10,000 crore, in line with the current end-of-day limit, applicable separately to long and short positions.
Effective October 1, the new framework “will facilitate market-making activity on all trading days while putting a check on creation of outsized intraday positions on expiry day,” Sebi said. The regulator added that the rules strike a balance between ease of trading and risk management, while also providing predictability and operational clarity.
The rules will apply only to index options, which account for the bulk of derivatives trading. Sebi noted that the changes were necessitated after observing instances where certain entities built outsized intraday Future Equivalent (FutEq) or delta-equivalent positions on expiry days, leading to volatility and potential risks to market integrity.
The move comes after Sebi barred US-based hedge fund Jane Street from Indian markets for manipulating indices by taking coordinated positions in cash and derivatives segments to make gains.
Stock exchanges will now monitor intraday positions using at least four random snapshots, including one between 2:45 pm and 3:30 pm, when trading activity typically peaks.
Entities breaching the limits will face scrutiny, with exchanges examining trading patterns and seeking explanations from clients.
Penalties or additional surveillance deposits may be imposed for violations, Sebi said.