The regulator has introduced explicit intraday position limits for entities trading in index options, effective October 1. Under the revised framework:
– Net intraday position limit: ₹5,000 crore per entity (vs. the current end-of-day cap of ₹1,500 crore).
– Gross intraday exposure: Capped at ₹10,000 crore, applied separately to long and short positions.
– Monitoring mechanism: Stock exchanges will take at least four random snapshots during trading hours, including one between 2:45 pm and 3:30 pm when activity usually peaks.
If an entity breaches the limits, exchanges will review trading patterns and seek explanations. Breaches on derivative expiry days will attract penalties, with the quantum determined by exchanges.
Brokerage view
Goldman Sachs has a ‘Neutral’ rating on BSE with a price target of ₹2,250. The brokerage said that the new intraday restrictions are likely to have a bigger impact on industry options premiums than previously estimated.
Earlier, it had assessed a 5% hit to option premiums following the introduction of end-of-day limits.
With intraday limits now in place, the effect could exceed that estimate.
As a result, Goldman Sachs has cut the industry index options premium penetration ratio from 0.5x to 0.3x.
However, the brokerage cautioned that the exact impact remains uncertain due to limited data on intraday exposures of key market participants compared with end-of-day positions.
SEBI has been reviewing its derivatives framework following recent market episodes, including the temporary ban on US-based high-frequency trader Jane Street. The regulator had found some of its trading strategies to be manipulative, which allegedly hurt retail investors.
