In a notable shift, India’s market regulator SEBI is easing its stance on intraday trading restrictions in the derivatives market, reflecting a more nuanced approach to balancing market stability with investor freedom.

Intraday Trading Gets Breathing Room

The Securities and Exchange Board of India (SEBI) has opted against capping intraday options positions in its upcoming derivatives regulations, according to two individuals familiar with the matter. This decision comes after industry participants expressed concern that stringent limits could disrupt legitimate market-making and dampen trading efficiency.

Initially, SEBI had proposed placing firm caps on options positions, even for positions held within the same trading session. However, after extensive feedback, the regulator has chosen a less rigid route. One source noted, “Blunt regulations should not serve as a substitute for surveillance and enforcement by the regulators.”

Instead of focusing on intraday constraints, SEBI will emphasize enhanced oversight and real-time monitoring mechanisms to detect manipulation and systemic risks.

Key Adjustments to Derivatives Exposure

SEBI is also adjusting how open interest is calculated for single-stock and index derivatives to offer a clearer picture of market exposure. This move aims to improve transparency and reduce the chance of excessive speculation distorting market signals.

Notably, the regulator is raising the cap on gross options positions from the originally proposed ₹15 billion to ₹100 billion (approx. $1.17 billion). Likewise, net positions will be allowed up to ₹15 billion, three times the previously suggested ₹5 billion limit.

These changes reflect a more calibrated approach that aligns regulatory goals with the realities of a growing, sophisticated market. Meanwhile, SEBI will continue to scrutinize trading in index options, particularly from an investor protection and systemic risk perspective.

Broader Impact on Market Sentiment

This regulatory recalibration could significantly impact market trends, especially as it relates to Nifty options and high-volume instruments favored by institutional players. By stepping back from overly restrictive rules, SEBI is signaling confidence in the market’s maturity and the ability of surveillance mechanisms to maintain order.

These updates are also likely to benefit segments that rely on liquidity and active positioning—such as bank rally trades and auto stocks hedging strategies. The regulatory relief could boost volumes, enhance price discovery, and attract broader participation from domestic and international investors.

For more on SEBI’s evolving regulatory framework, visit the official SEBI website.