Cash trading stalls, derivatives fire up

Also mandates regular monitoring by exchanges to check for breaches

- KHUSHBOO TIWARI

The Securities and Exchange Board of India (Sebi) has introduced a stricter framework to regulate intraday position limits in index options, aiming to curb speculation and potential market manipulation.

Effective October 1, the intraday net position limit will be capped at ₹5,000 crore per entity on a futures equivalent basis. Previously, traders were only required to comply with an end-of-day limit of ₹1,500 crore, allowing unrestricted intraday positions. Additionally, the intraday gross position limit remains at ₹10,000 crore per entity, separately for long and short positions—a measure Sebi had introduced from July 1. The transition to a delta-based or futures equivalent open interest calculation was implemented via a circular in May.

This enhanced regulatory framework follows Sebi's recent crackdown on Jane Street Group over alleged manipulation of the Bank Nifty index. The newly-imposed limits are expected to temper trading activity, particularly among institutional players and proprietary trading desks. To ensure compliance, Sebi has mandated stock exchanges to monitor these intraday limits through at least four random position snapshots during trading day. Notably, one snapshot must occur near market close, between 2:45 pm and 3:30 pm, when trading volumes typically peak.

Exchanges are also required to factor in underlying asset prices when capturing these snapshots.