Description

SEBI introduces intraday position limits of ₹5,000 cr net and ₹10,000 cr gross for index options to ensure market stability

Summary

SEBI has introduced a comprehensive framework for monitoring intraday position limits in equity index derivatives. The new rules establish entity-level intraday net position limits of ₹5,000 crores and gross position limits of ₹10,000 crores (on both long and short sides) for index options. Stock exchanges will monitor these limits through at least four random snapshots during the trading day, with enhanced scrutiny during market closing hours.

Key Points

  • Intraday net position limit set at ₹5,000 crores per entity (compared to ₹1,500 crores end-of-day limit)
  • Intraday gross position limit maintained at ₹10,000 crores per entity on both long and short sides
  • Minimum four random snapshots required during trading day for monitoring
  • One snapshot mandatory between 14:45-15:30 hrs during peak trading time
  • Additional exposure allowed against holdings of securities or cash equivalents
  • Penalties and additional surveillance deposits for breaches on expiry days

Regulatory Changes

The framework modifies the previously unspecified intraday limits that were only subject to random monitoring. The new structure provides clear quantitative limits while maintaining flexibility for market makers and liquidity providers. Stock exchanges must now use underlying prices at the time of position snapshots for accurate monitoring and examine trading patterns of entities breaching limits.

Compliance Requirements

  • Entities must maintain intraday positions within ₹5,000 cr net and ₹10,000 cr gross limits
  • Stock exchanges must conduct minimum four random intraday snapshots
  • Mandatory snapshot between 14:45-15:30 hrs
  • Breaching entities must provide rationale for positions when requested
  • Stock exchanges to examine trading patterns in index constituents for violators
  • Discuss breach instances with SEBI in surveillance meetings

Important Dates

  • September 1, 2025: Circular issued
  • July 1, 2025: Intraday monitoring framework implementation began
  • December 6, 2025: Normal implementation of end-of-day position limits

Impact Assessment

This framework addresses risks from outsized intraday positions, particularly on contract expiry days, while facilitating legitimate market making activities. The higher intraday limits (compared to end-of-day limits) provide flexibility for liquidity providers during trading hours while ensuring positions are reduced by market close. The penalty mechanism on expiry days specifically targets potential market manipulation risks during high-volatility periods.

Impact Justification

Significant change in intraday position monitoring affecting all index derivatives traders with specific limits and penalties