Description

SEBI introduces enhanced intraday position limits framework for index options with Net FutEq limit of ₹5,000 cr and Gross FutEq limit of ₹10,000 cr.

Summary

SEBI has implemented a comprehensive intraday position limits monitoring framework for equity index derivatives to strengthen risk monitoring and ensure market stability. The circular establishes specific FutEq (Future Equivalent) position limits for intraday trading in index options, with enhanced surveillance mechanisms including mandatory random snapshots during trading hours.

Key Points

  • Intraday Net position limit set at ₹5,000 crores (vs end-of-day limit of ₹1,500 crores)
  • Intraday Gross position limit established at ₹10,000 crores on both long and short sides
  • Minimum four random snapshots required during trading day including one between 14:45-15:30 hrs
  • Additional exposure allowed against securities holdings or cash equivalents
  • Special penalties applicable on contract expiry days for limit breaches
  • Enhanced examination of trading patterns for entities breaching limits

Regulatory Changes

  • Introduction of specific intraday position limits for index options (previously no specific intraday limits)
  • Mandatory snapshot-based monitoring system implementation
  • Enhanced surveillance requirements including rationale seeking from clients
  • Joint penalty framework by Stock Exchanges for expiry day breaches
  • Requirement to consider underlying price at time of position snapshots

Compliance Requirements

  • Stock Exchanges must implement minimum four random snapshot monitoring system
  • Exchanges must examine trading patterns of entities breaching limits
  • Requirement to seek rationale from clients for oversized positions
  • Examination of constituent index trading by breaching entities
  • Discussion of breach instances with SEBI in surveillance meetings
  • Implementation of penalty/additional surveillance deposit for expiry day breaches

Important Dates

  • September 01, 2025: Circular issued
  • Framework builds on previous SEBI circular dated May 29, 2025
  • End-of-day limits implementation timeline: Glide path from July 01, 2025 to December 05, 2025, with normal implementation from December 06, 2025

Impact Assessment

This framework significantly impacts derivatives traders, market makers, and liquidity providers by imposing structured intraday limits while allowing higher exposure than end-of-day limits. The enhanced surveillance mechanism aims to prevent outsized positions particularly on expiry days, which have posed market integrity risks. The framework balances market stability concerns with the need to facilitate legitimate trading activities including market making and liquidity provision.

Impact Justification

Major regulatory change affecting all equity index derivatives trading with significant position limit modifications and enhanced monitoring requirements