Sebi defers intraday monitoring of position limits for F&O contracts

SEBI has deferred the implementation of intraday monitoring of position limits for equity index derivative contracts, which was to be implemented from April 1.

For this purpose, stock exchanges were to consider minimum four position snapshots during the day and levy penalties for breach of such limits. Currently, such positions are monitored end of day.

System readiness

This is after feedback from industry associations such as ANMI, BBF and CPAI on concerns pertaining to the readiness of systems at the stock brokers’ end and their clients to monitor existing position limits intraday for index derivatives.

The market ecosystem is in the process of putting in place necessary systems for proposed delta-based or futures equivalent limits for index derivatives as per a recent SEBI 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 systems developed based on the existing parameters may become obsolete once the proposals contained in the consultation paper attains finality, and are implemented,” the regulator said.

SEBI plans to change the current methodology for computing open interest in equity derivatives from notional terms to a “future equivalent”, or a delta-based one, and revise position limits for index derivatives.