Description

SEBI introduces entity-level intraday position limits for index options with Net FutEq limit of ₹5,000 cr and Gross FutEq limit of ₹10,000 cr to ensure market stability.

Summary

SEBI has introduced a comprehensive framework for monitoring intraday position limits in equity index derivatives. The new entity-level limits include an intraday Net position limit of ₹5,000 crores (FutEq basis) and an intraday Gross position limit of ₹10,000 crores for both long and short positions. These limits will be monitored through at least four random snapshots during the trading day, with mandatory monitoring during the critical 14:45-15:30 hrs window. Entities breaching these limits, particularly on expiry days, will face penalties and additional surveillance deposits.

Key Points

  • Intraday Net position limit set at ₹5,000 crores (FutEq basis) per entity
  • Intraday Gross position limit maintained at ₹10,000 crores for both long and short sides
  • Monitoring through minimum four random snapshots daily, including one between 14:45-15:30 hrs
  • Additional exposure allowed against holdings of securities or cash equivalents
  • Breaches on expiry days will attract penalties and additional surveillance deposits
  • Stock Exchanges to examine trading patterns of entities breaching limits

Regulatory Changes

The framework represents a significant tightening from the previously proposed limits. Initially, SEBI had proposed Net FutEq of ₹1,000 crores and Gross FutEq of ₹2,500 crores for intraday positions. The final framework sets the Net limit at ₹5,000 crores (still lower than initially unlimited) while maintaining the Gross limit at ₹10,000 crores, equal to the end-of-day limit. The monitoring mechanism has been strengthened with mandatory random snapshots and specific focus on the closing hour trading activity.

Compliance Requirements

  • Entities must ensure their intraday positions do not exceed ₹5,000 crores Net FutEq
  • Gross positions must not exceed ₹10,000 crores on either long or short side
  • Entities seeking additional exposure must maintain adequate securities or cash equivalents
  • Breaching entities must provide rationale for positions when requested by exchanges
  • Trading patterns in index constituents will be examined for entities breaching limits
  • On expiry days, entities must be prepared for penalties and additional surveillance deposits for breaches

Important Dates

  • September 1, 2025: Circular issued
  • July 1, 2025 to December 5, 2025: Glide path period for end-of-day limits
  • December 6, 2025: Normal implementation of end-of-day limits
  • Immediate effect: Intraday monitoring framework implementation

Impact Assessment

This framework significantly impacts high-volume traders and market makers in index derivatives. The intraday Net limit of ₹5,000 crores, while higher than the end-of-day limit of ₹1,500 crores, still constrains large position-taking during trading hours. The enhanced monitoring through random snapshots, particularly during the volatile closing period, will require traders to maintain disciplined position management throughout the day. The framework aims to prevent outsized positions on expiry days while still facilitating legitimate market-making activities. Entities regularly trading large volumes in index options will need to implement robust position monitoring systems and may need to adjust their trading strategies to comply with these limits.

Impact Justification

Significant regulatory change affecting all index derivatives traders with strict intraday position limits and penalties for breaches