Sebi Delays Intra-day Position Limit Penalties

New Delhi, Mar 28 (PTI) Markets regulator Sebi on Friday asked stock exchanges to monitor the existing position limits for index derivatives on an intra-day basis from April 1, but there will be no penalties for breaching these limits until further notice.

In addition, the regulator has directed exchanges to prepare a joint standard operating procedure (SOP) intimating market participants regarding modalities of monitoring existing notional position limits intra-day and intimate such breaches to clients or trading members for their risk monitoring.

From April 1, 2025, exchanges will monitor position limits for index derivatives intraday, Sebi said in a circular.

"However, there shall be no penalty for breach of existing position limits intra-day and such intraday breaches shall not be considered as violations, until further directions," it added.

The decision came after the industry associations have raised concerns pertaining to the readiness of systems at the end of stock brokers and their clients to monitor existing position limits intra-day for index derivatives.

Further, the concern of industry associations has also been that the market ecosystem is in the process of putting in place necessary systems keeping in mind the proposed delta based or futures equivalent limits for index derivatives as stated in the Sebi consultation paper issued in February.

"Accordingly, in the interim, implementing systems for existing position limits that are based on notional activity of client / trading members could put additional strain on the market participants. Further, in the consultation paper, higher intraday limits are proposed compared to end of day limits which is not the case with existing limits," Sebi said.

Thus, systems developed based on the existing parameters may become obsolete once the proposals contained in the consultation paper attains finality and are implemented, it added.

In February, Sebi proposed measures to enhance risk monitoring and trading efficiency in the equity derivatives market, including the introduction of real-time monitoring of Futures & Options (F&O) Open Interest (OI).

The measures, if implemented, will help market participants make more informed decisions and manage risks more effectively.

Sebi proposed new position limits for index derivatives to better reflect actual market risks. For index options, the end-of-day limits are set at Rs 500 crore (net) and Rs 1,500 crore (gross), while intra-day limits are Rs 1,000 crore (net) and Rs 2,500 crore (gross).

For index futures, the end-of-day limit has been increased from Rs 500 crore to Rs 1,500 crore, with an intra-day limit of Rs 2,500 crore.

These limits are proposed to apply to all market participants, including FPIs, mutual funds, traders, and clients, ensuring a standardised framework.