‘SEBI framework on intraday position limit will stop manipulation’

The Securities and Exchange Board of India’s (SEBI) framework to increase intraday position limits of index equity derivatives at an entity level will enhance monitoring and makes manipulation difficult, experts said.

“A lower intraday cap would have constrained trading activity and hurt liquidity. The chosen limit gives market makers and institutional players the room to operate while keeping everything within clearly monitored boundaries,” said Feroze Azeez, Joint CEO, Anand Rathi Wealth Ltd.

“This blocks the potential for a big player to manipulate the market and makes it difficult to distort price discovery,” said Yogesh Chande, a securities lawyer and partner, Shardul Amarchand Mangaldas.

The regulator also decided to monitor the position limits of single entities in real time.

“Real-time monitoring provides an accurate picture of the exposure and helps build trust and confidence, making the market fairer with better risk at any particular point in time on a given day,” said Mr. Chande.

Moreover, the risk exposure of open interest will be calculated based on a new delta-based method, which is a more risk-weighted view of options contract.

“Delta-based approach weighs each position by its delta value, thus reflecting the true economic exposure of the market. Hence, this approach recognises the reality that not all contracts are created equal or have equal risks. The revised approach also protects retail investors and avoids exploitation of the existing framework, as it comprehends and visualises the risk involved more accurately,” said Mr. Chande.