Sebi Tightens Intra-day Monitoring of Index Derivatives

Sebi, India's markets regulator, has mandated stock exchanges to monitor intra-day position limits for index derivatives starting April 1. Despite implementing this rule, breaches of these limits will not incur penalties until further notice. The initiative aims to enhance market risk monitoring while transitioning to proposed updates.

In a move aimed at bolstering market oversight, India's markets regulator Sebi announced on Friday that stock exchanges will be required to monitor intra-day position limits for index derivatives starting April 1. This directive comes with the assurance that there will be no penalties for any breaches until further instructions are provided.

The Sebi circular issued also mandates exchanges to establish a joint standard operating procedure to inform market participants about the monitoring modalities of existing notional position limits. Those exceeding the limits will be notified, though penalties will not apply during the interim period.

The measures follow concerns from industry associations about the preparedness of stock brokers and clients to manage these limits. The exchanges are preparing necessary systems to transition towards proposed delta-based limits, as highlighted in a February consultation paper. These changes aim to enhance risk management and trading efficiency.

(With inputs from agencies.)