Sebi keeps tabs on intraday positions

New Delhi: Markets regulator Sebi came out with a new framework for monitoring intraday positions in equity index derivatives, a move aimed at preventing risks caused by large exposures.

Under the new framework, the net intraday position has been capped at Rs5,000 crore per entity in index options as against the end-of-day limit of Rs1,500 crore, the Securities and Exchange Board of India (Sebi) said in a circular. The gross intraday position has been restricted at Rs10,000 crore, the same as the existing end-of-day limit. This applied separately to long and short positions, it added. The framework, effective 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 provides predictability, operational clarity, and a fair balance between ease of trading and risk management, Sebi said. The framework will be restricted to index options only, which generally dominate the derivatives landscape. In simple words, Sebi’s new rule would oversee large trading positions held by individual entities during the trading day.

This will help in preventing excessive risk-taking and maintaining market order. The new rules have been issued after Sebi observed growing instances of outsized intraday Future Equivalent (FutEq) or delta equivalent positions created by certain entities in index options on expiry days, leading to volatility and risk to market integrity.