SEBI comes out with new framework for monitoring intraday place in index choices

Markets regulator SEBI got here out with a brand new framework for monitoring intraday positions in fairness index derivatives, a transfer geared toward stopping dangers brought on by giant exposures.

Under the brand new framework, the online intraday place has been capped at ₹5,000 crore per entity in index choices 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 place has been restricted at ₹10,000 crore, the identical as the present 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 shall be restricted to index choices solely, which typically dominate the derivatives panorama.

In easy phrases, Sebi’s new rule would oversee giant 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 cases of outsized intraday Future Equivalent (FutEq) or delta equal positions created by sure entities in index choices 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 within the money, and, futures and choices markets concurrently for making good-looking beneficial properties.

In its round issued late Monday evening, the regulator mentioned that inventory exchanges would monitor positions by way of at the very least 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 bounds, inventory exchanges will study buying and selling patterns and search a rationale for such positions from the shoppers.

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