India's market regulator, the Securities and Exchange Board of India (SEBI), announced on Monday updated regulations for overseeing intraday positions in equity derivatives. This move comes in light of SEBI's recent ban on U.S. high-frequency trading firm Jane Street for alleged manipulative trading practices that negatively impacted retail investors.
Effective from October 1, the revised framework introduces a new intraday net position limit of 50 billion rupees ($571.39 million) per entity in index options, substantially higher than the previous end-of-day limit of 15 billion rupees ($171.42 million). Additionally, SEBI has implemented a gross intraday exposure cap of 100 billion rupees ($1.14 billion) for both long and short positions.
To ensure compliance with these new rules, stock exchanges will conduct regular monitoring using a minimum of four random snapshots throughout the trading day. This monitoring will include a snapshot taken between 1445 and 1530 IST, a period when trading activity typically reaches its peak.
SEBI's decision to introduce stricter regulations surrounding equity derivatives trading reflects its commitment to safeguarding the interests of investors and maintaining the integrity of the Indian securities market. By setting clear limits on intraday positions and exposure, the regulator aims to reduce the potential for market manipulation and protect retail investors from incurring losses.
With these new rules set to take effect soon, market participants and entities engaged in equity derivatives trading will need to adjust their strategies and operational procedures to comply with SEBI's latest regulatory requirements. As the deadline for implementation approaches, industry stakeholders are advised to familiarize themselves with the new guidelines and ensure that their trading practices align with the updated framework.
SEBI's proactive approach to monitoring and regulating equity derivatives trading underscores its ongoing efforts to promote transparency, fairness, and stability in India's financial markets. By establishing clear guidelines and limits for intraday positions, the regulator aims to create a level playing field for all market participants and strengthen investor confidence in the integrity of the country's securities market.
