On November 25, 2020, SEBI issued a press release (59/2020) to review the regulatory measures introduced vide an earlier SEBI press release dated March 20, 2020, which had introduced certain regulatory measures in the context of the market volatility that was present then. The objective of those measures was to ensure orderly trading and settlement, effective risk management, price discovery and maintenance of market integrity, and they were to be in force till November 26, 2020.
Now, having reviewed the market situation and looked at the changes in the market environment, SEBI reviewed those regulatory measures as explained below.
1. Stocks in derivatives segment (F&O stocks)
The regulatory measures mentioned in S. No. 1.(i) and 1.(ii) of Annexure A to SEBI’s press release dated March 20, 2020 stand withdrawn with effect from the close of business on November 26, 2020. This is to be subject to the continuation of the following till further directions:
● With regard to S. No. 1.(i), in the event market-wide position limit (MWPL) utilization in a security crosses 95%, the derivative contracts enter into a ban period. During such a ban period, all clients or trading members will be required to trade in the derivative contracts of such scrips only to decrease their positions through offsetting positions. In case of any increase in open positions, there would be appropriate penal and/or disciplinary action of the stock exchanges/clearing corporations taken.
● Stock exchanges or clearing corporations are to put in place effective mechanisms to monitor if the market wide open interest for scrips meeting the above-mentioned criteria exceeds 95% of the reduced market wide position limit (as arrived at above).
● In addition to that, stock exchanges or clearing corporations are also required to check whether any member or client has exceeded their existing positions or has created a new position in the scrips during the new ban period. These checks are to occur on an intraday basis (monitoring of Peak intraday OI or Periodic intraday monitoring of OI).
2. Increase in margin for Non-F&O Stocks in Cash Market
This provision is to stand withdrawn with effect from the close of business on November 26, 2020.
3. Index Derivatives
The regulatory measures mentioned at S. No. 3 of Annexure A to SEBI’s press release dated March 20, 2020 are to continue to remain in force till further directions from the regulator. This is subject to the revised S. No. 3.(iii), which the regulator clarified as follows.
● If any of the above-mentioned entities exceed the respective limits prescribed at 3(i) and 3(ii) above, an additional deposit is to be paid by such entity. This deposit is equivalent to the amount of the margin that is chargeable on the excess position, beyond the limits prescribed at 3(i) and 3(ii) above. Also, this margin is to be retained by the stock exchanges or clearing corporations for a period of one month.
4. Flexing of dynamic price bands for F&O stocks
The regulatory measures mentioned at S. No. 4 of Annexure A to SEBI’s press release dated March 20, 2020 are to remain in force till further directions from the regulator.
SEBI’s press release also stated that stock exchanges and clearing corporations will be issuing the instructions to the market participants in this regard, as necessary.