India plans position limits to restrict domestic index options

The Securities and Exchange Board of India proposed on Monday that exchanges cap net intraday Future Equivalent (FutEq) or delta equivalent positions for index options at INR 50 billion (£424 million) and the gross FutEq at INR 100 billion.

The Indian watchdog said: “After deliberations in Secondary Market Advisory Committee (SMAC), it is decided to implement the proposed intraday monitoring framework for index options to ensure market stability, while facilitating participation by various market participants including liquidity providers/market-makers.”

Under the proposals, the position limits will be monitored by trading venues at four intervals during the trading day, including between 14:45 to15:30 IST, which is peak trading time in India.

SEBI said the latest intraday position limits will be implemented from October 1 while a phased implementation known as a glidepath started on July 1 and runs to December 5.

The proposals came after the Indian regulator asked exchanges to examine trading patterns of entities breaching the limits, including trading activity in the constituents of the index, according to the circular.

SEBI said those who breach the limits will have to pay penalty or additional surveillance deposit beginning December 6, once the glidepath ends.

The National Stock Exchange of India (NSE) and the Bombay Stock Exchange (BSE) said last week they plan to start trading equity derivatives earlier in the day from December.

Jane Street confirmed in late July its request for more time to answer a wide-ranging investigation by the Indian regulator into the market-maker’s options trading.