Regulatory Relaxation Amid Industry Concerns
The Securities and Exchange Board of India (SEBI) has provided relief to stock exchanges and clearing corporations by easing intraday position limit monitoring norms. In a circular issued on March 28, SEBI clarified that while exchanges must monitor intraday limits using at least four daily snapshots, no penalties will be imposed for breaches until further notice.
This move comes after industry associations raised concerns about market participants’ readiness to comply with intraday monitoring requirements introduced in SEBI’s December 30, 2024, directive. The regulatory relaxation aims to ease compliance burdens while allowing time for market players to upgrade their monitoring systems.
Key SEBI directive change: Intraday limit breaches will be monitored but not penalized for now
Implementation start date: April 1, 2025
Minimum monitoring requirement: At least four position snapshots per trading day
Industry concerns addressed: Readiness of stock brokers, system infrastructure, and evolving market norms
Original Guidelines and Subsequent Relaxation
In December 2024, SEBI had announced that intraday position limits for equity index derivatives would be strictly monitored, and any breaches would attract penalties similar to end-of-day violations. The key mandates included:
Intraday position monitoring for index derivatives, in addition to end-of-day checks.
A minimum of four snapshots per day, randomly taken during pre-defined time windows.
Extension of the existing penalty framework to include intraday breaches.
However, following strong pushback from industry associations—including the Association of National Exchanges Members of India (ANMI), Bombay Brokers’ Forum (BBF), and the Commodity Participants Association of India (CPAI)—SEBI decided to temporarily suspend the penalty enforcement, citing practical challenges in implementation.
Previous rule: Mandatory penalty for intraday breaches
Current status: Only monitoring required, no penalty
Reason for change: Stock brokers and clients not fully equipped to comply with new rules
Challenges in Implementation and Market Readiness
Industry stakeholders argued that the current market ecosystem is not yet prepared to implement real-time intraday monitoring and penalties. Many stock brokers and trading firms still rely on legacy systems, which would require significant upgrades to ensure compliance.
Another key concern raised was the upcoming changes in intraday position limits. SEBI’s February 24, 2025, consultation paper proposes a new limit structure based on delta-based or futures-equivalent limits, which could render current compliance mechanisms obsolete.
This created a dilemma for brokers, as implementing intraday limits under the existing framework could lead to unnecessary costs and inefficiencies, particularly if these limits are modified after SEBI finalizes the new methodology.
Primary challenge: Existing systems not equipped for intraday monitoring
SEBI’s proposed changes: Delta-based or futures-equivalent position limits
Impact on brokers: Additional compliance costs if changes occur mid-implementation
Industry Implications
With SEBI’s decision to focus only on monitoring, market participants now have additional time to upgrade their systems before penalties are enforced. However, once SEBI finalizes its proposed changes to intraday position limits, brokers will need to align their infrastructure accordingly.
For traders and institutional investors, this temporary relaxation provides breathing room but also raises uncertainty about future enforcement. While higher intraday limits have been suggested in SEBI’s consultation paper, the final framework remains subject to revision.
Brokerages and clearing members are now expected to enhance their monitoring capabilities in anticipation of stricter compliance measures in the future. The industry will likely see greater adoption of advanced risk management systems, ensuring smoother compliance when the final regulations take effect.
What happens next?: SEBI to finalize intraday position limits framework
Key focus for brokers: Upgrading compliance infrastructure
Potential long-term outcome: Stricter enforcement with higher intraday limits
