Sebi Announces Measures To Bolster Risk Monitoring

New Delhi: Markets regulator Sebi on Thursday came out with a series of measures to strength-en risk monitoring in equity derivatives, including the intra-day monitoring of market-wide posi-tion on single stock derivatives.

As part of the new measures, exchanges will conduct intraday monitoring of Market-Wide Posi-tion Limit (MWPL) utilisation at a minimum of four random intervals during the trading day, Sebi said in its circular. Additionally, the regulator has introduced new eligibility criteria for de-rivatives on non-benchmark indices and revised individual entity-level position limits based on the updated MWPL framework. These measures will be implemented in a phased manner be-ginning October 1, the Securities and Exchange Board of India (Sebi) said. The regulator noted that the derivatives market enables efficient price discovery, improved market liquidity and permits investors to manage risk. Stock exchanges and Clearing Corpora-tions (CCs) together provide the platform and products for trading in the derivatives market, while ensuring online real-time risk management, adequate surveillance, as well as smooth set-tlement of trades.

“The role of product offering, risk management, and surveillance by stock exchanges and clear-ing corporations is crucial in ensuring the integrity of the securities market ecosystem. This is specifically pertinent in view of the evolving market dynamics in the derivatives segment in re-cent years, with increased retail participation, offering of short tenure index options contracts, and heightened trading volumes in index derivatives on expiry day,” Sebi said.

To limit settlement risk from intraday spikes in future equivalent (FutEq) open interest (OI) lim-its, Sebi asked exchanges to perform intraday monitoring of MWPL utilisation at least four ran-dom times during the trading session to take appropriate actions once OI utilisation breaches certain limits such as levying additional surveillance margin, monitoring for entity-level concen-tration and additional surveillance checks. Additionally, exchanges have been asked to report instances of significant utilisation of MWPL or breach of MWPL to Sebi in the fortnightly surveillance meeting. The regulator has set eligibil-ity criteria for derivatives on non-benchmark indices, mandating that such indices must have a minimum of 14 constituents, with the weight of the top constituent not exceeding 20 per cent and the combined weight of the top three constituents not exceeding 45 per cent.