SEBI Rethinks Intraday Limits for Equity Derivatives—What It Means

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19 Aug, 2025

SEBI Rethinks Intraday Limits for Equity Derivatives—What It Means

Context & Reasoning

SEBI is reassessing intraday position limits for index derivatives to rein in market risk and better protect retail investors. This comes after SEBI’s action against Jane Street over alleged manipulative strategies that caused significant retail investor losses.
Earlier, in February, SEBI had proposed a ₹10 billion (~$115 million) intraday limit for index derivatives but later retracted the plan due to pushback from major market makers. Instead, exchanges were instructed to monitor intraday positions.
Presently, SEBI allows end-of-day exposure caps—₹15 billion per trading member—but lacks defined intraday trader limits. Reconvening of its Secondary Market Advisory Committee aims to address these recurring gaps in market oversight.

Key Points

Retail Protection: With retail investors bearing losses (estimated at ₹524 billion in FY2024), SEBI's move is aimed at mitigating gaming by high-frequency players and reducing volatility.
Market Fairness & Stability: New intraday limits and enhanced surveillance may curb disproportionate influence by a few large participants and foster a safer, more stable trading ecosystem.
Level Playing Field: Tighter intraday caps ensure trading remains balanced, reducing the chances of dominant players manipulating prices.
Implementation Roadmap: SEBI may ease into new rules through phased rollouts, alert systems, and gradual enforcement—similar to glide paths used with other recent F&O regulations.

How It Could Impact the Indian Market

Stakeholder	Potential Impact
Retail Traders	Increased protection from predatory strategies, but potential for tighter access.
Large Market Makers	Restrictions on intraday exposure may challenge algorithmic strategies.
Overall Market Stability	Likely improvement in volatility control and reduced systemic risk.
Exchanges & Brokers	Must enhance monitoring tools, enforce SOPs, and educate clients on new norms.
Institutional Traders	Greater compliance overhead; strategies may need adjustment to fit within limits.

Final Thoughts

SEBI's reconsideration of intraday limits marks a significant step toward tightening equity derivatives oversight. By monitoring intraday exposure more closely, the regulator aims to mitigate manipulation risks, protect retail investors, and imbue the market with greater stability. While it may demand greater compliance and adjustment, the long-term payoff is a more robust and resilient trading ecosystem.

By Nehal Taparia

This content is for educational and knowledge purposes only and should not be considered as investment or Trading advice. Please consult a certified financial advisor before making any investment or Trading decisions.

Our Recent FAQS

Frequently Asked Question &
Answers Here

Q1: Why is SEBI revisiting intraday limits now?

SEBI's move follows concerns over retail investor losses and manipulation tactics, particularly highlighted by the Jane Street episode. The aim is to improve oversight and safeguard market integrity.

Q2: What were the previous intraday limit proposals?

SEBI proposed a ₹10 billion cap for index derivatives intraday positions, but withdrew the measure after feedback from big market makers. Now, it’s reconsidering enforcement by empowering exchanges to monitor intraday exposures more effectively.

Q3: What is the current position limit framework?

Currently, end-of-day exposure is capped at ₹15 billion per trading member, but there’s no uniform intraday limit. Monitoring is in place, but explicit caps for intraday are being debated.

Q4: How will exchanges adapt?

Exchanges will likely follow Standard Operating Procedures (SOPs) for intraday monitoring—taking random snapshots of positions throughout the trading day, alerting participants, and escalating to SEBI if required.

Q5: Will this strategy hurt liquidity or participation?

There may be initial impacts—for instance, NSE’s CEO reported fewer active derivative traders, dropping from around 5.5 million to 3 million, partly due to stricter regulations. However, longer-term benefits include greater confidence in market fairness and stability.