Summary of this article
Sebi's new entity level intraday monitoring framework has been introduced to maintain market stability and enhance participation by various different participants including market makers.
Sebi's new framework aims to protect retail investors by restricting excessive intraday leverage and large speculative bets and other predatory strategies.
Sebi has also outlined the penalties for breaching the newly set limits.
The capital market regulator, the Securities and Exchange Board of India (Sebi) has released a new framework for monitoring intra-day position limits for equity index derivatives. Sebi released the new framework through a circular on September 1, 2025.
Sebi’s Intraday Monitoring Framework
The new entity level intraday monitoring framework for index options has been introduced to maintain market stability and enhance participation by various different participants including market makers. As per Sebi’s new framework the net intraday position, determined on a futures-equivalent (FutEq) or delta equivalent basis, will be restricted at Rs 5,000 crore per entity.
Delta equivalent or FutEq position limits aim to cap the total risk a market participant can hold in derivatives by converting all positions taken by the participant into a standard "futures-equivalent" value. Delta limits take into account price sensitivity for each option, unlike traditional limits which are based on the notional value of contracts.
Notably, this is an increase from the previous end-of-day limit of Rs 1,500 crore. On the other hand, the gross Intraday Gross Position Limit (FutEq basis) will be restricted at Rs 10,000 crore, same as the existing end-of-day limit. However the new framework is limited to trade in index options only. The provisions of the circular shall come into effect from October 01, 2025.
How Does Sebi’s Framework For Index Derivatives Affect Retail Investors
Sebi's new framework came into being following discussions with the stock exchanges, after several incidents were reported in which entities created outsized intra-day FutEq positions in index options on the day of contract expiry. This in turn can result in potential risks to market stability and integrity. Additionally, the new framework also seeks to provide predictability and operational clarity for investors.
“The aforesaid framework would facilitate market making activity on all trading days while putting a check on creation of outsized intraday position on the expiry day for orderly trading. The aforesaid framework would also provide predictability, operational clarity, and a fair balance between ease of trading and risk management,” Sebi said.
Notably, many retail investors have witnessed significant losses in the derivatives market. The new framework aims to protect retail investors by restricting excessive intraday leverage and large speculative bets and other predatory strategies. The new framework also seeks to create a stable and fair trading environment by preventing larger participants from influencing prices.
Sebi’s Checks and Balances
Sebi mentioned in the circular that the new limits will be monitored by the exchanges through a minimum of four random snapshots during the trading day. These will include one snapshot taken in the 02:45 pm to 03:30 pm window wherein trading activity is generally higher. A snapshot in this context refers to a specific and random point during trading hours in which the stock exchange will capture details related to an entity's intraday position in index options. The regulator added that the exchanges will consider the underlying price at the time of taking snapshots.
Sebi has also outlined the penalties for breaching the newly set limits. The market regulator said that in case of such breaches, the exchanges will take a look at the entity’s trading patterns and seek rationale from them. Additionally, on the day of the expiry of options contracts, such breaches will attract penalty or additional surveillance.
“For the entities breaching the aforesaid limits, stock exchanges shall examine trading patterns of such entities which would inter-alia include seeking rationale for such positions from the clients, examining trading in the constituents of the index by the entity and discussing such instances with Sebi in the surveillance meeting. On the day of expiry of options contracts, the breaches of aforesaid position limits shall additionally attract penalty/additional surveillance deposit, as decided jointly by stock exchanges,” Sebi said.
The market regulator has also urged stock exchanges and clearing corporations to prepare a joint standard operating procedure (SOP) for monitoring in line with the circular. Additionally, Market Infrastructure Institutions have been urged to put in place the necessary systems for implementation of the new framework.
