The Securities and Exchange Board of India (SEBI), on 29 May 2025, issued Circular No. SEBI/HO/MRD/TPD-1/P/CIR/2025/79 setting out measures to strengthen the equity derivatives framework through intraday position limit monitoring for equity index derivatives. The circular establishes specific numerical limits on net and gross intraday positions, marking a significant tightening of the risk management architecture for India's derivatives markets.
Background
India's equity derivatives market ranks among the largest globally by notional turnover, with index options accounting for a substantial majority of traded volumes. The rapid growth of derivatives trading, particularly in weekly options contracts, had raised regulatory concerns about the adequacy of existing position limit frameworks, which primarily focused on end-of-day positions rather than intraday exposure.
SEBI had initiated the process of derivatives framework reform through a consultation paper in 2024, followed by a series of measures including increased contract sizes and enhanced margin requirements. The present circular addresses the gap in intraday monitoring by introducing specific position limits that apply throughout the trading day, not merely at settlement.
Key Provisions
The circular introduces the following framework:
Intraday net position limit: A net intraday position limit of Rs 5,000 crore has been prescribed for equity index derivatives. This limit applies to the net long or short position across all equity index derivative contracts held by a single entity during the trading session.
Intraday gross position limit: A gross intraday position limit of Rs 10,000 crore has been established, capturing the total long and short positions held by an entity.
End-of-day options limit: The net end-of-day FutEq open interest limit for options has been set at Rs 1,500 crore, with a gross FutEq open interest limit of Rs 10,000 crore.
Monitoring mechanism: Stock exchanges are required to take at least four random snapshots of positions throughout each trading day to monitor compliance with the intraday limits. This represents a departure from the previous practice of monitoring positions only at end-of-day.
Penalty framework: Non-compliance with the position limits attracts penalties, with enhanced penalties proposed for breaches on expiry days, reflecting SEBI's concern about expiry-day concentration risk.
Implications for Practitioners
This circular has direct implications for large proprietary traders, institutional investors, algorithmic trading firms, and market makers operating in the equity index derivatives segment. Position sizing and risk management frameworks must be recalibrated to accommodate the intraday limits, which impose constraints not previously applicable during the trading session.
For compliance officers at brokerages and trading members, the random snapshot monitoring mechanism requires real-time position surveillance capabilities. The technical infrastructure for tracking client-level positions against the prescribed limits must be in place before the framework becomes operative.
Securities law practitioners advising derivatives market participants should note that this circular forms part of a broader derivatives reform package. Subsequent circulars, including the September 2025 framework for intraday position limit monitoring, build on and operationalise the principles established in this circular. Advisors should assess the cumulative compliance impact of the full reform package rather than treating each circular in isolation.