Sebi relaxes F&O monitoring norms for intraday limits, removes penalty for breach

Market regulator Securities and Exchange Board of India (Sebi) on Friday said that exchanges will monitor a minimum of four position limits for index derivatives intraday from April 1, 2025 while clarifying that a breach of existing position limits will not be a violation amounting to a penalty.

It has also directed BSE and NSE to jointly prepare a standard operating procedure (SOP) intimating the market participants regarding modalities of monitoring existing notional position limits intraday. The exchanges will also have to intimate clients/trading members about the breaches for their risk monitoring.

In a December 30, 2024 circular, Sebi had directed the stock exchanges and clearing corporations to start intraday monitoring of positions in addition to the ‘End of Day’ monitoring mechanism . “The position limits, for equity index derivative contracts, would also be monitored on an intraday basis from April 01, 2025,” the then circular said.

For this purpose, Sebi mandated stock exchanges to consider minimum 4 position snapshots during the day. The number of snapshots may be decided by the respective stock exchanges subject to a minimum of 4 snapshots in a day. The snapshots would be randomly taken during pre-defined time windows.

The December circular had made provisions for a penalty structure for the breach. The existing framework of penalty structure for breach of end of day position limit was to be extended by exchanges for intraday position limit breaches as well.

Industry associations like Association of National Exchanges Members of India (ANMI), Bombay Stock Exchange Brokers’ Forum (BBF) and Commodity Participants Association of India (CPAI) raised concerns pertaining to the readiness of systems at the end of stock brokers and their clients to monitor existing position limits intraday for index derivatives.Moreover, the concern of industry associations was also that the market ecosystem is in the process of putting in place necessary systems keeping in mind the proposed delta based or futures equivalent limits for index derivatives as stated in the Sebi consultation paper of February 24.Accordingly, in the interim, implementing systems for existing position limits that are based on notional activity of client / trading members could put additional strain on the market participants, they had argued.

The market regulator on Thursday proposed to limit the expiries of all equity derivatives contracts of an exchange to one of either Tuesdays or Thursdays. This is with a view to provide optimal spacing between expiries across exchanges while avoiding choice of either the first day of the week or the last day as an expiry day.

Also Read: Sebi proposes to limit F&O expiry for exchanges to either Tuesday or Thursday

Following this, NSE deferred implementation of F&O expiry for Monday that was due to take effect from Tuesday, April 4.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)