SEBI Restores Higher Intra-day Limits for Index Options with Tighter Oversight

Moneylife Digital Team 02 September 2025

Investor Interest

Market regulator securities and exchange board of India (SEBI) has reintroduced higher intra-day limits for trading in equity index derivatives, but with stricter monitoring measures to safeguard market integrity. The revised framework, set to take effect from 1 October 2025, is aimed at balancing liquidity needs with risk control.

In a circular, SEBI specified that intra-day positions in index options will now face a cap of Rs5,000 crore on a net basis and Rs10,000 crore on a gross basis, both calculated in futures-equivalent terms. While the gross cap aligns with current end-of-day limits, the new net cap is a substantial increase from the existing Rs1,500 crore threshold, offering traders more flexibility during market hours.

The regulator’s intervention follows growing concerns that certain participants, particularly on expiry days, were creating outsized positions that triggered volatility and threatened orderly trading. To check this, stock exchanges will be required to monitor positions through at least four random intra-day snapshots, including one during the last 45 minutes of trading, when squaring-off activity typically spikes.

Any breach of these limits will prompt close scrutiny. Exchanges will investigate trading behaviour, seek clarifications, review activity in constituent stocks and submit their findings to SEBI. On expiry days, violations will also invite penalties or mandatory surveillance deposits, to be jointly determined by the exchanges.

SEBI underlined that the framework is not intended to restrict genuine hedging or market-making. Liquidity providers will continue to enjoy operational flexibility since additional exposures supported by cash or collateral remain permissible.

In its circular, the regulator said the new system seeks to “facilitate market-making activity on all trading days while putting a check on outsized intra-day positions on expiry days for orderly trading,” adding that it also brings predictability, operational clarity, and a balance between ease of trading and risk management.

The framework will apply exclusively to index options, which dominate India’s derivatives market. SEBI noted that in the absence of intraday caps, some traders had placed disproportionate expiry-day bets that could destabilize the market.

Exchanges and clearing corporations must draft a standard operating procedure (SOP) for intraday monitoring within 15 days and inform market participants before enforcement. They must also align their systems, processes and byelaws with the new rules.

While the overall monitoring framework kicks in from 1 October 2025, the penalty provisions for expiry-day violations will come into force from 6 December 2025, coinciding with the conclusion of the phased transition on position limits.

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