By Jayshree P Upadhyay
MUMBAI (Reuters) -India’s markets regulator has decided against setting hard limits on traders’ intraday options positions when it issues new norms for derivatives, two sources with direct knowledge of the matter said.
Securities and Exchange Board of India (SEBI) plans to soon issue these new norms, which will also change how open interest is calculated on single stock and index derivatives for a more accurate picture of exposure, the sources said.
SEBI did not respond to Reuters’ request for an official comment.
The regulator has taken several measures in the last one year to curb excessive speculation in India’s derivatives trading market, with its last set of changes in October raising the entry barrier to trade in futures and options.
In February, SEBI proposed new regulations such as limits on positions traders could take in options contracts, including for intraday trading, as it sought to prevent manipulation and better reflect market risk.
But the regulator decided not to impose limits on intraday trading after receiving market participants’ feedback that such measures could stifle legitimate market-making, the sources said.
“Blunt regulations should not serve as a substitute for surveillance and enforcement by the regulators,” one of the two people cited above said.
In its upcoming norms, the regulator has decided to raise the limit on gross options positions traders can hold to 100 billion rupees ($1.17 billion) from the 15 billion rupees it had proposed, the sources said.
It also plans to limit net options positions at 15 billion rupees, compared to the 5 billion rupees it proposed, they added.
“SEBI will re-examine the trading activity of individuals in index options from an investor protection and systemic stability perspective,” one of the sources said.
($1 = 85.3810 Indian rupees)
(Reporting by Jayshree P Upadhyay; Editing by Leroy Leo)
