SEBI eases intraday position limit rules, defers penalty for breaches

Markets regulator SEBI on Friday eased intraday position limit norms for index derivatives, stating that while stock exchanges will begin monitoring such limits from April 1, 2025, there will be no penalty for breaches until further notice.

The Securities and Exchange Board of India (SEBI), in a circular, said exchanges will conduct intraday monitoring of position limits for equity index derivative contracts as per its Master Circular issued on December 30, 2024.

Stock exchanges are required to take a minimum of four random position snapshots during the day within pre-defined time windows.

However, responding to concerns from industry associations, SEBI has decided not to impose penalties for intraday breaches of existing position limits.

Such breaches will not be treated as violations until further directions, the circular said.

The Association of National Exchanges Members of India (ANMI), Brokers’ Forum (BBF), and Commodity Participants Association of India (CPAI) had highlighted challenges faced by stock brokers and their clients in ensuring system readiness for intraday monitoring of existing position limits.

They also highlighted the ongoing transition to a proposed delta-based or futures-equivalent limit system, as mentioned in SEBI’s February 24 consultation paper.

"In the interim, implementing systems for existing position limits that are based on notional activity of client / trading member could put additional strain on the market participants," the circular said.

"Further, in the said consultation paper, higher intraday limits are proposed compared to end of day limits which is not the case with existing limits. Thus, systems developed based on the existing parameters may become obsolete once the proposals contained in the consultation paper attains finality and are implemented."

Exchanges will prepare a standard operating procedure (SOP) to inform market participants about intraday monitoring modalities and notify clients or trading members of any breaches for risk management purposes, SEBI added.