Position limits in index F&O raised 15x to ₹7,500 cr

The market regulator's secondary market advisory committee (SMAC) has increased the position limits for trading members, cumulatively for client and proprietary trades, in index futures & options contracts to ₹7,500 crore or 15% of the total open interest (OI).

SEBI says as per the extant practice, the position limits will be applicable for index futures & options separately. The decision was taken following feedback received from market participants, it says.

As per SEBI's 2023 master circular on stock exchanges and clearing corporations (SECC), the position limit at the trading member (TM) level was earlier set at ₹500 crore or 15% of the total open interest (OI) in the market. The position limit was separately applicable for all open positions on futures & options contracts, in a particular underlying index.

The regulator says the open interest of both the participants and the market is dynamic and changes throughout the day. To provide clarity to participants, it decided that in conformity with the extant practice in the currency derivatives segment, the positions of market participants in the equity derivatives segment (index and stocks) will also be monitored based on the total open interest of the market at the end of previous day’s trade.

In case of a drop in market OI compared to the previous day’s market OI, market participants may breach the specified position limits even if their positions have remained unchanged throughout the day. "For such cases of passive breaches, market participants would not be penalised and not be required to unwind their positions," says the regulator.

The provisions related to position limits for trading members will come into effect immediately, while the mechanism for monitoring position limits will be applicable from April 1, 2025.

The stock exchanges and clearing corporations have been directed to make amendments to the relevant bylaws, rules and regulations for its implementation. They will also bring the provisions of this circular to the notice of the market participants and disseminate the information.

Last week, the capital markets regulator issued two key circulars on changes in timing for securities payout in the activity schedule for T+1 rolling settlement and the extension of the deadline for the direct payout of securities to client account to November 11.

SEBI on June 5, 2024, had mandated that the pay-out of securities be credited directly to the client account by the clearing corporations (CC). Under phase-1, the securities for pay-out in the equity cash segment, including netted cash and F&O physical settlement, will be credited directly to the respective client’s demat account, it said.

To protect the client’s securities, SEBI on June 05, 2024, had mandated the pay-out of securities directly to the client’s demat account. With regard to the funded stocks under the margin trading facility, SEBI said that they will be held only by way of a pledge.