SEBI raises position limits for index derivatives

The Securities and Exchange Board of India (SEBI) has announced changes to position limits and monitoring practices for equity derivatives, particularly index futures and options contracts.

Effective immediately, SEBI has increased the position limits for trading members (TMs) in index derivatives. The new limit is set at the higher of Rs 7,500 crore or 15% of the total Open Interest (OI) in the market, up from the previous limit of Rs 500 crore or 15% of total OI. The position limits will be applicable for index futures and index options separately.

Starting from April 1, 2025, SEBI will begin monitoring positions based on the total open interest of the market at the end of the previous day's trade. This shift from real-time monitoring aligns with the current practice in the currency derivatives segment and aims to address concerns about fluctuations in open interest throughout the trading day.

SEBI has clarified that participants will not be penalized or forced to unwind their positions in cases where the market Open Interest drops compared to the previous day, even if their position remains unchanged. This is to prevent "passive breaches" of the new position limits.

Stock exchanges and clearing corporations are required to modify their bye-laws and regulations to implement these changes. Market participants, including trading members, are advised to review the SEBI circular and familiarize themselves with the new guidelines.

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