The Securities and Exchange Board of India (SEBI) issued a press release (PR No. 44/2020) on August 26, 2020. It essentially notified that the regulatory measures introduced by SEBI on account of the COVID-19 pandemic via an earlier press release (PR No. 18/2020) on March 20, 2020 would continue to remain in force till September 24, 2020.
Let’s take a look at the regulatory measures brought about by SEBI as mentioned in the earlier press release. Here’s a breakdown of those measures for better understanding.
- Stocks in derivatives segment ( F & O stocks )
1.Revision of Market Wide Position Limit ( MWPL)
2.MWPL is revised to 50 % of existing levels for the defined eligibility and these criteria are only for limit revision and not for determining enhanced eligibility criteria for derivatives stocks
3.EOD positions, as on circular date would not be impacted.
4.If MWPL > 95%, derivative contracts enter into a ban period and clients/TM can only reduce through offsetting positions.
5.Exchanges/CC to monitor open interest as per given critieria and exceeding 95% of revised MWPL . Also to monitor limits Peak/Intra day OI whether at client/TM level or created new position during the ban period.
6.Current penalty structure to be enhanced to 10 times of minimum and 5 times of maximum w.r.t existing penalties specified by Exchanges/CC.
- Increase in margins only in Equity segment ( F & O stocks shortlisted in risk management criteria of MWPL limit of 50% )
- Revised minimum Margins for Equity Market enhanced to 40% and effective for one month is proposed to be implemented as minimum 20%,30% and 40% by 23 rd March, 2020,26th March 2020 and 30th March 2020 respectively
- Margins in derivatives segment to continue as per extant framework
- Index Derivatives
- Revised position limits in equity index derivatives (futures and options)
- Short positions in index derivatives (short futures, calls and long puts) to not exceed (in notional value) holding of stocks- for Mutual Funds / FPIs / Proprietary for TM / Clients
- Long positions in index derivatives (long futures, long calls and short puts) to not exceed (in notional value) for MFs’/ FPIs’ holding of cash, government securities, T-Bills and similar instruments.
- Additional position limits of . Equity Index Futures/ Equity Index Options Contracts of Rs. 500 Crores to be available to TM-Proprietary / FPIs / Mutual Funds / Clients
- The existing positions as on Exchange s/CC circular date would not be impacted (i.e., the positions shall be permitted to be held till expiry or close-out, whichever is earlier). However, for any fresh position taken, the entire positions (including the grandfathered positions) shall be subject to limits mentioned above.
- Flexing of dynamic price bands for F&O stocks
- Stocks in the F&O segment are subject to dynamic price bands. One of the conditions for relaxing the price band is that a minimum of 25 trades should be executed with five different UCC on each side of the trade at or above 9.9 percent and so on.
- In addition to the existing requirements, the dynamic price bands may be flexed only after a cooling-off period of 15 minutes after meeting the existing criteria specified by exchanges. Also covered in NSE/BSE/MCX-SX
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