Sebi New Rule: SEBI's new rule on trading in the stock market will come into effect from October 1. Due to this, investors will have to keep their positions according to the actual margin available to them.

Sebi New Rule: Market regulator SEBI has announced the implementation of new position limits on intraday derivative trading (F&O). The new rule will come into effect from October 1. Under this new rule, SEBI has increased the intraday net position limit for index options from the earlier Rs 1500 crore to Rs 5,000 crore per unit. Its purpose is to create a balance between market depth and stability.

What will be the net intraday position limit now? 

In a circular issued on September 1, SEBI said that it will impose clear limits on intraday investments in index options, by far the most traded segment of the derivatives market. This will be calculated based on the new futures-equivalent (FutEq) framework after adjusting for long and short trades.

Under this framework, the net intraday position limit of a trader measured on a futures-equivalent basis will be Rs 5,000 crore. With this new rule, no investor will be able to take a position beyond the limit set by SEBI. However, the gross position limit has been retained at Rs 10,000 crore, which will be applicable separately on the long and short side. SEBI has also tightened the monitoring norms of exchanges for such large speculative bets. 

What will be the benefit of this? 

SEBI says that some investors take large positions by taking excessive leverage. This increases the risk as well as volatility in the market. Now with the new rule, traders will have to create positions according to the actual capital and margin available to them. This will increase transparency and stability in the market. Also, retail investors will be protected from losses. Due to the ban on excessive limits, investors will now have to do intraday trading within the prescribed limit. This means that now traders will not be able to take large trades by taking more leverage, which increases the possibility of loss for small retail investors to a great extent.