SEBI Introduces New Intraday Position Limit Framework for Index Options
On September 1, 2025, the Securities and Exchange Board of India (SEBI) issued a new circular that sets out a clear framework for monitoring intraday position limits in equity index derivatives. This move aims to ensure market stability and orderly trading, especially on high-volatility days such as contract expiry.
Background
In February 2025, SEBI released a consultation paper proposing Future Equivalent (FutEq) position limits for index options. Later, in May 2025, after receiving feedback and consulting the Secondary Market Advisory Committee (SMAC), SEBI finalized end-of-day position limits with a glide path for implementation.
However, it was observed that on expiry days, some entities were building outsized intraday positions, which created potential risks for market integrity. To address this, SEBI has now introduced a structured intraday monitoring framework.
Key Features of the New Framework
1. Intraday Position Limits
- Net Position Limit (FutEq basis): ₹5,000 crore per entity.
- Gross Position Limit (FutEq basis): ₹10,000 crore per entity (applies separately to long and short positions).
These limits are significantly higher than the end-of-day cap of ₹1,500 crore net, providing flexibility for traders during the day while controlling extreme exposures.
2. Monitoring Mechanism
- Stock Exchanges will capture a minimum of four random snapshots during market hours.
- One of these snapshots must be taken between 2:45 pm and 3:30 pm, when trading activity usually peaks.
- Position calculations will be based on the underlying index price at the snapshot time.
3. Additional Provisions
- Entities can take extra exposure if backed by cash or securities, in line with earlier SEBI guidelines.
- In case of breaches, exchanges will:
- Seek explanations from clients,
- Review trades in index constituents, and
- Report serious cases to SEBI.
- On expiry days, breaches will attract penalties or additional surveillance deposits, jointly decided by stock exchanges.
- The framework applies only to index options, not stock derivatives.
Implementation Timeline
- October 1, 2025 – Circular becomes effective.
- December 6, 2025 – Penalty provisions (for expiry day breaches) will kick in, coinciding with the end of the glide path for FutEq-based position limits.
Why This Matters
This framework strikes a balance between trading convenience and risk control. By allowing higher intraday exposure but tightening expiry-day checks, SEBI ensures that:
- Liquidity providers and market makers can operate smoothly,
- Risks of excessive speculation are reduced, and
- Market integrity remains intact.
Final Thoughts
The new intraday monitoring framework reflects SEBI’s proactive approach in safeguarding the derivatives market. Traders, brokers, and institutions must adapt their risk management systems to comply with these guidelines before October 2025.
For further details, market participants should watch out for the Standard Operating Procedure (SOP) that stock exchanges and clearing corporations will release soon.
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