Markets regulator Securities and Exchange Board of India (SEBI) has instructed stock exchanges to begin monitoring the existing position limits for index derivatives on an intraday basis starting April 1, 2025. However, there will be no penalties for breaching these limits until further notice, the regulator clarified in a recent circular.
Under the new guidelines, exchanges will monitor these positions by taking at least four snapshots of market positions during the trading day, with the timing of these snapshots to be randomly selected within pre-defined windows. The regulator has stated that exchanges can increase the number of snapshots beyond the minimum requirement but must ensure that at least four are taken each day.
“However, there shall be no penalty for breach of existing position limits intra-day and such intraday breaches shall not be considered as violations, until further directions,” SEBI added in its statement.
This move comes in response to concerns raised by industry associations, which pointed out the readiness challenges faced by stock brokers and clients in monitoring existing position limits intraday. The groups also noted that market systems are still adapting to proposed changes outlined in SEBI's consultation paper released in February. This paper suggests the introduction of delta-based or futures-equivalent limits for index derivatives, which could significantly impact the industry’s existing infrastructure.
SEBI acknowledged these concerns, explaining that implementing systems for monitoring notional position limits during the day could put additional strain on market participants in the interim, particularly as higher intraday limits have been proposed compared to current end-of-day limits.
In February, SEBI proposed several measures to enhance market risk management and improve trading efficiency, including real-time monitoring of Futures & Options (F&O) Open Interest. These measures aim to provide market participants with the tools to make more informed decisions and manage risks more effectively.
As part of these proposed changes, SEBI outlined new position limits for index derivatives. For index options, the end-of-day limits are set at Rs 500 crore (net) and Rs 1,500 crore (gross), while the intra-day limits are Rs 1,000 crore (net) and Rs 2,500 crore (gross). For index futures, the end-of-day limit has been increased from Rs 500 crore to Rs 1,500 crore, with an intra-day limit of Rs 2,500 crore. These limits would apply to all market participants, including FPIs, mutual funds, traders, and clients, ensuring a standardized framework.
Guidelines on fast-track follow-on offer by REITs, InvITs
In other regulatory developments, SEBI has also introduced a framework to fast-track follow-on offers (FPOs) for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). Under this framework, SEBI has set lock-in periods for sponsors receiving preferential issues of REIT and InvIT units. A three-year lock-in applies to 15% of the units allotted to sponsors and sponsor groups, while the remaining units will be locked in for one year. Additionally, SEBI has clarified rules for inter-group transfers within REITs or InvITs.
The FPO mechanism enables REITs and InvITs to raise additional funds after their initial public offerings (IPOs). The new rules take effect immediately, with provisions covering listing approvals, offer documents, and minimum public unit holding requirements. For REITs and InvITs to proceed with an FPO, they must seek in-principle approval from the stock exchanges where their units are listed and file the necessary documents with SEBI after obtaining approval from merchant bankers.