India’s market watchdog released new guidelines for tracking intraday stock derivatives contracts. After temporarily barring Jane Street, a U.S. high-frequency trading company, from the Indian markets on the grounds that certain of its trading tactics were manipulative and caused losses for retail investors, the Securities and Exchange Board of India has been reviewing the regulations governing equity derivatives. With effect from October 1, the new framework limits intraday net positions in index options at 50 billion rupees ($571.39 million) per firm, instead of the end-of-day cap of 15 billion rupees ($171.42 million). According to SEBI’s statement, the maximum gross intraday exposure has been set at 100 billion rupees ($1.14 billion), applied separately to long and short positions.
The statement went on to say that stock exchanges would employ at least four random snapshots to monitor compliance during the trading day, including one between 1445 IST and 1530 IST, when trading activity often peaks. Stock exchanges will look at trading patterns and look for an explanation for positions taken by companies that are beyond the limitations. According to SEBI, a breach of the limitations on the day the contract derivative expires will result in a penalty; however, stock exchanges will determine the exact amount of the penalty.
