Overview
India’s Securities and Exchange Board (SEBI) unveiled updated measures to enhance risk management in the equity derivatives market. The new rules, effective from October 1, require exchanges to impose intraday position limits and conduct real-time monitoring.
Position Limits
- Net Intraday Limit: â‚ą50 billion per entity in index options.
- Gross Intraday Exposure: â‚ą100 billion per entity, applied separately to long and short positions.
Monitoring Framework
Stock exchanges must capture at least four random intraday position snapshots, including one during 14:45–15:30 IST. If positions exceed limits, exchanges will examine trading patterns, request explanations, and enforce penalties on the day of contract expiry.
Background
SEBI’s interim ban on high-frequency trader Jane Street triggered this review. The regulator seeks to curtail manipulative strategies and safeguard retail investors from sudden intraday leverage spikes.
Implementation and Compliance
Clearing corporations will update risk engines to flag limit breaches. Member entities must enhance internal controls and collateral management to adhere to new caps.
Market Impact
Derivatives participants anticipate reduced volatility as intraday monitoring dissuades aggressive speculative flows. Risk committees and treasury desks are revising margin policies accordingly.
Future Outlook
SEBI plans to assess market response and consider further refinements, including delta-based limits and extended snapshots for higher frequency instruments.
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