The Securities and Exchange Board of India (“SEBI”), in the exercise of its powers conferred under Section 11(1) read with Section 11(2)(a) of the Securities and Exchange Board of India Act, 1992, read with Regulation 51 of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, vide Circular No. SEBI/HO/MRD/TPD-1/P/CIR/2025/41,[1] dated March 28, 2025, issued the intraday monitoring of position limits for index derivatives. The provisions laid down hereunder shall come into effect immediately.
The key highlights of this circular are as follows:
I. Intraday Monitoring of Position Limits as per the SEBI Master Circular dated December 30, 2024:
- In accordance with Clause 1.3.4 of SEBI Master Circular dated December 30, 2024, (“Master Circular”) position limits for equity index derivative contracts shall be monitored on an intraday basis from April 01, 2025.
- Stock Exchanges shall take a minimum of 4 (four) position snapshots during the day at random intervals within pre-defined time windows.
- The existing penalty structure for breaches of end-of-day position limits shall be extended to intraday position limit breaches as well.
II. Industry Concerns:
- Industry Associations (ANMI, BBF, CPAI) have raised concerns regarding the readiness of stock brokers’ systems to monitor intraday position limits for index derivatives. The market ecosystem is still in the process of implementing systems in line with the proposed delta-based or futures-equivalent limits mentioned in SEBI’s consultation paper dated February 24, 2025.
- Accordingly, in the interim, implementing systems for existing position limits which are based on notional activity of client/ trading member may put an additional strain on the market participants.
- The aforementioned consultation paper dated February 24, 2025, proposes higher intraday limits compared to end-of-day limits, which is not the case with the existing position limit framework. Implementing systems based on current limits may become obsolete once new regulations are finalized.
III. Regulatory Relief and Implementation:
- Keeping in view of the same, the exchanges shall now conduct intraday monitoring of position limits as per Clause 1.2.4.1 and Clause 1.3.4.2 SEBI’s Master Circular.
- However, no penalties shall be imposed for intraday breaches of existing position limits until further directions from SEBI.
- Exchanges shall also develop a joint Standard Operating Procedure (SOP) to notify market participants about the modalities of intraday position limit monitoring and intimate clients/trading members of any breaches for their risk assessment.
[1]https://www.sebi.gov.in/legal/circulars/mar-2025/intraday-monitoring-of-position-limits-for-index-derivatives_93123.html