(Bloomberg) -- India’s securities regulator on Tuesday increased the position limit imposed on equity index derivatives traders by 15-fold to almost $900 million per contract, the first such tweak in over four years, following a demand from market participants.
Traders can now increase their exposure in index derivatives products to the higher of 75 billion rupees or 15% of the overall open interest in a contract, according to a circular published by the Securities and Exchange Board of India. The position limit was fixed at $60 million in March 2020.
SEBI has also directed stock exchanges to monitor the position limit of traders based on the open interest of the contract on the previous trading day. Any breach triggered because of a decline in overall open interest in a contract will not result in a forced liquidation of excess exposure by the traders. This tweak in monitoring method will come into effect from April 1.
Read: Why India’s Giant Options Market Worries Regulators: QuickTake
The step comes just a fortnight after the securities watchdog unleashed measures to curb excessive trading in the South Asian nation’s equity derivatives market. India became the world’s largest market for derivatives products last year, thanks to the influx of millions of new retail traders.
The country’s booming market for complex financial products has attracted global high-speed trading giants like Jane Street Group, Optiver BV and Citadel Securities LLC. The total notional turnover in India’s derivatives market surged to about $6 trillion in February, surpassing the country’s national output.
©2024 Bloomberg L.P.