In a significant move to curb manipulation in the derivative market, the Securities and Exchanges Board of India (SEBI) on Monday night put out a detailed framework to monitor intraday positions in equity index derivatives. It has also imposed clear intraday limits positions for each entity trading in index options.
“Intraday net position limit (FutEq) for each entity shall be ₹5,000 crore (as against end of day limit of ₹1,500 crore). Intraday Gross position limit (FutEq basis) for each entity shall be ₹10,000 crore, separately both on long and short sides,” said SEBI.
Compliance checks and penalties
More importantly, it has also mandated that stock exchanges must monitor compliance via at least four random snapshots daily including one during the high‑activity window between 14:45 and 15:30.
The new rules, which will come into effect from October 1, will also attract penalties in case entities cross the prescribed limits from December 6 at the exchanges’ discretion – a major shift from the non-penalty mechanism that was introduced earlier.
“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,” the circular said.
Protecting investors and market stability
SEBI’s big decision comes after it found US-based market maker – the Jane Street Group – taking excessive positions in the index components that helped it rake in a whopping over Rs 44,000 crore between January 2023 and March 2025.
The market regulator also noted that the absence of intraday curbs was allowing entities to build outsized bets, particularly on expiry days, that could destabilise the market. These caps were placed on feedback from market participants and the Secondary Market Advisory Committee (SMAC) of SEBI.
The new framework comes at a time, when the market regulator has proposed a slew of changes to curb market manipulation. Last month, it proposed that that non-benchmark indices should have at least 14 constituents, with the top constituent’s weight capped at 20% and the top three constituents’ combined weight not exceeding 45%. Recently, chairman Tuhin Kanta Pandey said that the regulator plans to set the ball rolling for long tenure expiries as well.
Market Infrastructure Institutions will also be required to make suitable changes to their systems, processes, and byelaws to support the rules.
Imposition of these limits is a welcome move, said experts. “This would ensure that small shareholders are not taken for a ride at the hands of the big and mighty. The step is a welcome move in ensuring the integrity of the market and ensuring confidence of small investors,” said Akshaya Bhansali, Managing Partner at Mindspright Legal.
The sudden fluctuations on expiry day of contracts in the futures and options segment would be protected from this step. SEBI is formalizing enforceable limits and introducing penalties, marking a clear move from a soft‑launch approach to stricter compliance.
“The need now is for SEBI to actively monitors the trading of these large players and rule out any sort of cartelisation. Similar situations have been seen by the market in commodities trading when one person using different trading accounts had tried to manipulate the prices of commodities during,” Bhansali said.
Added Naman Shah, Senior Vice President at Ohm Dovetail, a derivative clearing member, said that this move will compel brokers and institutions to upgrade their risk systems and enforce real-time exposure controls, reducing the likelihood of sharp market disruptions. The possibility of penalties on expiry days, strengthens accountability.
“Overall, these changes are likely to boost investor confidence, align the Indian market with global best practices, and improve the credibility and resilience of the derivatives ecosystem,” Shah said.