(Reuters) -India markets regulator on Thursday issued a set of measures to strengthen risk monitoring of equity derivatives, including the monitoring of market wide position on single stock derivatives.
As part of the measures, the Securities and Exchange Board of India (SEBI) decided against setting hard limits on traders’ intraday options positions, but changed how open interest is calculated on single stock and index derivatives for a more accurate picture of exposure.
It has set out a phased timeline for exchanges to implement these steps till December 6.
The regulator in the last one year has taken several measures such as increasing entry barriers to curb excessive speculation in India’s derivatives trading market. Enhancing risk monitoring is part of those measures.
In February, SEBI had proposed new regulations to calculate open interest in derivatives contracts and suggested limits on positions traders could take to prevent manipulation and better reflect market risk.
But the regulator decided not to impose limits on intraday trading and relaxed net and gross positions from its proposals in February.
Reuters had reported earlier this month the regulatory thinking that such limits could stifle legitimate market-making.
SEBI in its final norms on Thursday raised the limit on gross options positions traders can hold to 100 billion Indian rupees ($1.17 billion) from the 15 billion rupees it had proposed.
Net options positions has been set at 15 billion rupees, compared to the proposed 5 billion rupees, SEBI said.
The regulator said that these relaxed limits will ‘strike a balance between market stability/ fear of manipulation due to large position and traders will be able to take meaningful exposure.’
($1 = 85.4010 Indian rupees)
(Reporting by Sethuraman NR and Jayshree P Upadhyay; Editing by Shailesh Kuber)
