Sebi has convened its secondary market advisory committee to consider stricter position limits for equity index derivatives, Reuters reported, citing two people with direct knowledge of the matter. The move comes after Sebi temporarily banned U.S. high-frequency trading firm Jane Street earlier this year, alleging its strategies were manipulative and had led to losses for retail investors.
The committee will examine potential caps on intraday positions to prevent large traders from building outsized exposures, the sources told Reuters. It is also expected to discuss maximum allowable exposures for individual members and monitoring mechanisms for exchanges. Any recommendations will be put before Sebi’s board before a final decision is made, they said.
In February, the regulator had proposed a cap of Rs 1,000 crore for intraday positions in index derivatives but backed down following pushback from major market-making firms. Instead, exchanges were instructed to monitor intraday exposures.
In May, Sebi set an end-of-day exposure cap of Rs 1,500 crore for firms across their option portfolios but did not specify limits for individual trading members.
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Additional measures are now being considered as part of broader structural reforms aimed at containing risks and curbing the dominance of large firms, Reuters reported, citing one source.India accounts for nearly 60% of global equity derivatives trading volumes, yet retail traders have faced heavy losses. A Sebi study showed retail investors lost Rs 52,400 crore in the year ended March 31, 2024, while proprietary traders posted gross profits of Rs 33,000 crore and foreign investors Rs 28,000 crore.Sebi has already tightened the market framework by raising the minimum lot size and reducing the number of contract expiries. Its latest deliberations underscore regulators’ concerns over systemic risks in an overheated market.The ban on Jane Street was lifted last month after the firm deposited $567 million into an account controlled by SEBI pending the outcome of its probe, Reuters reported.
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