MC EXCLUSIVE Sebi mulls double-edged move: Higher intraday limits, with expiry-day clampdown and penalties for breach

Sebi’s mulls double-edged move: higher intraday limits, with expiry-day clampdown and penalties for breach

The Securities and Exchange Board of India (Sebi) is weighing a review of intraday position limits in index options, especially with a focus on reining in excessive trading on expiry days, Moneycontrol has learnt from people familiar with development who requested not to be named.

At present, there is no limit for intraday positions, however, exchanges monitor intraday limits at the same thresholds as end-of-day for index options, Rs 1,500 crore on a net delta (futures-equivalent) basis and Rs 10,000 crore on a gross basis.

However, Sebi’s examination of recent expiry-day data in Nifty and Sensex contracts showed that positions routinely breached these levels during intraday trade. On the August 7 expiry, for example, the top net long and short positions in Nifty touched Rs 4,245 crore and Rs 5,409 crore, respectively, while gross positions exceeded Rs 10192 crore (long) and Rs 11,777 crore (short).

Similarly, on August 5 Sensex expiry day, the top net long position was Rs 2249 crore and top net short position was Rs 3055 crore. Top gross long position was Rs 11,831 crore and top gross short position was Rs 9647 crore.

In this backdrop, Sebi is considering increasing the intraday monitoring threshold to Rs 5,000 crore, while keeping the Rs 10,000-crore gross ceiling unchanged. The move follows the regulator’s February 2025 consultation paper that had proposed higher intraday thresholds but was withdrawn in favour of tighter surveillance.

Sebi noted that since positions expiring on expiry day do not reflect in end-of-day (EoD) data, intraday monitoring becomes crucial to detect oversized exposures. “The regulatory intent of rationalizing expiry-day hyperactivity while limiting risks associated with large, outsized positions favours stipulating limits for intraday index options positions,” the regulator observed.

Though regulator has clarified that additional positions backed by cash, cash equivalents, or securities holdings will be permitted.

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The latest framework proposes distinguishing between expiry and non-expiry days. On non-expiry days, breaches would only trigger exchange-level scrutiny. On expiry days, however, violations would attract penalties. Exchanges will also be required to monitor intraday positions at four random intervals daily, with at least one check close to market close.

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The issue has been actively discussed with stock exchanges, brokers, and other market participants. SEBI’s proposal seeks to strike a balance between maintaining market integrity and ensuring that liquidity providers and market makers—who often square off intraday positions—are not unduly constrained.

Sebi had earlier prescribed a glide path for position limits in index options up to December 5, 2025, allowing participants time to build delta-monitoring systems. With systems expected to be in place by December 6, Sebi plans to operationalize the intraday monitoring framework from that date.

By reintroducing intraday limits with sharper surveillance, Sebi aims to address systemic risks, safeguard market integrity, and rein in volatility, particularly on expiry days when speculative activity often peaks.

An email seeking comments from Sebi on proposed move did not elicit any response.