SEBI, the Indian market regulator, has issued an intraday monitoring and position caps framework for equity index options to curb “outsized” expiry-day positioning while preserving liquidity provision. The new limits are a tenth of the net positioning it questioned at Jane Street.
SEBI set an entity-level intraday net future equivalent delta limit of INR50 billion (US$567m) and an intraday gross (long + short deltas equivalent) limit of INR100 billion (US$1.134bn) per side, to be policed by at least four random snapshots during the session, including one between 14:45 and 15:30. End-of-day (EOD) caps on position size are INR15 billion (US$170m) net and INR100 billion (US$1.134bn) gross. The rules apply only to index options.
The move follows SEBI’s February consultation and a May circular that had suggested end-of-day (EOD) position limits a lot lower than those now prescribed at INR5 billion net EOD (US$56.7m) in future equivalent delta.
The new circular says it responds to “observed instances of outsized intraday future equivalent positions… on the day of contract expiry” and aims to “facilitate market making… while putting a check on creation of outsized intraday position on the expiry day for orderly trading.”
Jane Street net positioning, which prompted the review, on 17 January 2024 reached US$4.5 billion or about INR4 trillion.
Read more: SEBI draws the line between trading prowess and market manipulation
In equity index futures, the position limit for trading members is the higher of INR75 billion (US$840m) or 15% of the total open interest in the market.
