SEBI comes out with new framework for monitoring intraday position in index options

Markets regulator SEBI got here out with a new framework for monitoring intraday positions in fairness index derivatives, a transfer geared toward stopping dangers attributable to massive exposures.

Under the new framework, the web intraday position has been capped at ₹5,000 crore per entity in index options as in opposition to the end-of-day restrict of ₹1,500 crore, the Securities and Exchange Board of India (SEBI) mentioned in a round.

The gross intraday position has been restricted at ₹10,000 crore, the identical as the prevailing end-of-day restrict. This utilized individually to lengthy and brief positions, it added.

The framework, efficient from October 1, “would facilitate market-making activity on all trading days while putting a check on creation of outsized intraday position on the expiry day for orderly trading”.

Additionally, it gives predictability, operational readability, and a good steadiness between ease of buying and selling and threat administration, SEBI mentioned.

The framework can be restricted to index options solely, which usually dominate the derivatives panorama.

In easy phrases, Sebi’s new rule would oversee massive buying and selling positions held by particular person entities in the course of the buying and selling day. This will assist in stopping extreme risk-taking and sustaining market order.

The new guidelines have been issued after SEBI noticed rising situations of outsized intraday Future Equivalent (FutEq) or delta equal positions created by sure entities in index options on expiry days, resulting in volatility and threat to market integrity.

The transfer follows SEBI quickly barred the U.S.-based hedge fund Jane Street from the Indian securities market after discovering it responsible of manipulating the indices by taking bets in the money, and, futures and options markets concurrently for making good-looking positive factors.

In its round issued late Monday night time, the regulator mentioned that inventory exchanges would monitor positions by a minimum of 4 random intraday snapshots, together with one between 2:45 p.m. and three:30 p.m., a interval when heightened exercise is mostly noticed.

For entities breaching the boundaries, inventory exchanges will study buying and selling patterns and search a rationale for such positions from the purchasers.

The breaches of position limits will appeal to a penalty or further surveillance deposit, as determined collectively by inventory exchanges, SEBI mentioned.