Description

SEBI introduces entity-level intraday position limits for index options to ensure market stability and prevent outsized positions on expiry days.

Summary

SEBI has introduced a comprehensive framework for monitoring intraday position limits in equity index derivatives, effective from specified dates. The framework establishes entity-level intraday net and gross position limits measured on a Future Equivalent (FutEq) basis, with enhanced monitoring through random snapshots during trading hours. Special attention is given to expiry day trading to prevent creation of outsized positions that could impact market integrity.

Key Points

  • Intraday Net position limit set at ₹1,500 crores (FutEq basis) for each entity
  • Intraday Gross position limit set at ₹10,000 crores (FutEq basis) separately for long and short sides
  • Minimum four random snapshots required during trading day for monitoring
  • One mandatory snapshot between 14:45-15:30 hrs during peak closing time activity
  • Additional exposure allowed against securities or cash/cash equivalent holdings
  • Penalties and additional surveillance deposits for limit breaches on expiry days

Regulatory Changes

The framework modifies the earlier position limits structure by implementing specific intraday monitoring mechanisms. Previously, intraday limits were not specifically defined but monitored through end-of-day position limits. The new framework introduces concrete intraday limits with enhanced surveillance measures, particularly focusing on expiry day trading patterns where outsized positions have been observed.

Compliance Requirements

Stock Exchanges must implement monitoring systems with at least four random snapshots daily, including one during the closing period (14:45-15:30 hrs). For entities breaching limits, exchanges must examine trading patterns, seek rationale for positions, review trading in index constituents, and discuss instances with SEBI in surveillance meetings. On expiry days, limit breaches will attract penalties or additional surveillance deposits as jointly determined by exchanges.

Important Dates

  • July 01, 2025: Initial implementation of intraday monitoring framework
  • December 06, 2025: Normal implementation of end-of-day position limits (after glide path period)
  • September 01, 2025: Circular issuance date

Impact Assessment

This framework significantly impacts high-volume traders and market makers in index derivatives, requiring them to maintain positions within prescribed limits throughout the trading day. The enhanced monitoring, particularly on expiry days, aims to prevent market manipulation while facilitating legitimate market-making activities. Entities will need to upgrade their risk management systems to ensure continuous compliance with intraday limits and prepare for potential penalties on expiry day breaches.

Impact Justification

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