Sebi issues new rules for monitoring intraday derivative positions

The new framework, which will take effect from October 1, sets an intraday net position limit of ₹5,000 crore per entity in index options, compared with an end-of-day limit of ₹1,500 crore

India's markets regulator late on Monday issued fresh rules for monitoring intraday positions in equity derivatives.

The Securities and Exchange Board of India has been reassessing the rules for equity derivatives after it temporarily banned US high-frequency trading firm Jane Street from the Indian markets, saying some of its trading strategies were manipulative and left retail investors with losses.

The new framework, which will take effect from October 1, sets an intraday net position limit of ₹5,000 crore ($571.39 million) per entity in index options, compared with an end-of-day limit of ₹1,500 crore ($171.42 million).

Gross intraday exposure has been capped at ₹10,000 crore ($1.14 billion), applied separately to long and short positions, according to Sebi's statement.

Stock exchanges will monitor compliance using at least four random snapshots during the trading day, including one between 1445 IST and 1530 IST, when trading activity typically peaks, it added.

For entities breaching the limits, stock exchanges will examine trading patterns and seek an explanation for such positions.

Breach of the limits on the day of contract derivative expiry will attract a penalty, Sebi said, adding that the quantum of penalty will be decided by stock exchanges.