SEBI New Rule: The Securities and Exchange Board of India (SEBI) is implementing new rules for the derivatives market starting tomorrow, October 1st. This rule is being implemented to curb unnecessary risk and excessive volatility in intraday trading. In its circular, SEBI clarified that intraday position limits have now been set for each trading entity in equity index derivatives.
The Securities and Exchange Board of India (SEBI) is going to implement a new rule for the derivatives market from tomorrow, October 1. This rule is being implemented with the aim of curbing unnecessary risk and excessive volatility in intraday trading. SEBI has clarified in its circular that now a limit has been fixed for intraday positions for every trading entity in equity index derivatives, so that unnecessary risk and volatility in the market can be prevented. This limit will come into effect from tomorrow, October 1, 2025.
What are the new rules?
Net intraday position limit: Now the net position (on a futures-equivalent basis) of any entity cannot exceed Rs 5,000 crore.
Gross intraday position limit: The gross position limit has been fixed at ₹10,000 crore, which is currently equal to the end-of-day limit.
How will monitoring take place?
Stock exchanges will now be required to monitor trading by taking snapshots at least four times randomly during trading. One of these snapshots will be taken between 2:45 pm and 3:30 pm. This is because the last hour of a trading session often sees heavy activity.
Additionally, the exchange will also have to take into account the current price of the index while monitoring the positions, to ensure accurate assessment of real-time risk.
The move is aimed at ensuring that no investor or trader impacts market stability by making large trades, especially on option expiry days when there is high volatility.
Action against rule breakers
If an entity breaches the threshold:
– The stock exchange will examine the trading pattern of that entity.
– The client will be asked to explain the reason for such a large position.
– Trading done by that entity in index-linked stocks will be investigated.
– If necessary, that case will be reported in the surveillance meeting of SEBI.
Trading entities may be subject to penalties or additional surveillance deposits for violations, especially on expiry day.
Why was this step taken?
In recent months, concerns have grown that some trading institutions are making unusually large trades in the market. These institutions typically take large positions on expiry days, creating volatility in the market. This creates market chaos, and some individuals exploit this. SEBI is introducing these new rules to prevent this malpractice. The regulator has become more vigilant following the alleged fraud incident involving Jane Street Group.
These new rules for intraday surveillance will come into effect from October 1, 2025, while the penalty provisions related to violation of expiry day rules will come into effect from December 6, 2025.
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