SEBI Big Push To Protect Retail Investors! Mulls Rs 1,500-Cr Cap on Intraday Derivative

The Securities and Exchange Board of India (SEBI) is weighing a fresh cap of Rs 1,500 crore on net intraday positions in equity index derivatives, as part of its ongoing effort to tighten oversight of the derivatives market, according to a report by Reuters. The move follows concerns that certain trading strategies employed by global high-frequency firms have distorted market fairness, leading to retail investor losses.

According to Reuters, which cited people familiar with the matter, the proposal was recently discussed at a meeting of SEBI’s Secondary Market Advisory Committee, which advises on equity market regulations. The recommendation has now been forwarded to SEBI’s board for final approval. SEBI has not yet issued an official statement on the matter.

Earlier this year, SEBI floated the idea of setting a Rs 10,000 crore ceiling on net intraday index derivative positions. However, the plan was shelved after resistance from large market-making firms, prompting the regulator to instead direct exchanges to monitor firms’ exposures more closely.

Data reviewed by the regulator revealed that on expiry days of index contracts, intraday positions often far exceed end-of-day limits, underscoring the need for defined intraday thresholds. At present, entities are allowed an end-of-day net cap of Rs 15,000 crore and a gross position of up to Rs 1 lakh crore.

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A clear benchmark, officials say, will also help exchanges act decisively. “A regulatory limit will signal exactly when to impose penalties,” one source explained. Breaches of intraday limits, especially on contract expiry days, are expected to attract fines, with exchanges required to report violations to SEBI.

The committee has further advised tightening oversight of trades executed by connected foreign entities, which often operate through intermediaries. While specific limits are yet to be finalized, the regulator is keen to plug gaps that allow excessive speculation to go unchecked.