Market Wide Position

CLIENT LEVEL POSITION LIMITS

The gross open position for each client, across all the derivative contracts on an underlying, should not exceed 1 % of the free float market capitalization (in terms of number of shares) or 5% of the open interest in all derivative contracts in the same underlying stock (in terms of number of shares) whichever is higher.

MARKET WIDE POSITION LIMITS

The market wide limit of open position (in terms of the number of underlying plus stock) on futures and option contracts on a particular underlying stock should be lower of 30 times the average number of shares traded daily during the previous calendar month, in the relevant underlying security in the underlying segment or 20% of the number of shares held by non promoters in the relevant underlying security i.e., free-float holding. This limit is applicable on all open positions in all futures and option contracts on a particular underlying stock. The enforcement of the market wide position limits is done in the following manner:

a.     At the end of the day the exchange tests whether the market wide open interest for any scrip exceeds 95% of the market wide position limit for that scrip. In case it does so, the exchange takes note of open position of all cl ient/TMs as at the end of that day for that scrip and from next day onwards they can trade only to decrease their positions through offsetting positions.

b.     At the end of each day during which the ban on fresh positions is in force for any scrip, the exchange tests whether any member or client has increased his existing positions or has created a new position in that scrip. If so, that client is subject to a penalty equal to a specified percentage (or basis points) of the increase in the position (in terms of notional value). The penalty is recovered before trading begins next day. The exchange specifies the percentage or basis points, which is set high enough to deter violations of the ban on increasing positions.

c. The normal trading in the scrip is resumed after the open outstanding positions comes down to 80% or below of the market wide position limit. Further, the exchange also checks on a monthly basis, whether a stock has remained subject to the ban on new position for a significant part of the month consistently for three months. If so, then the exchange phases out derivative contracts on that underlying.

Fll AND SUB-ACCOUNT POSITION LIMITS

FII and sub-account position limits are specified as given below:

i.    The FII position limit in all index options contracts on a particular underlying index is Rs.250 crore or 15% of the total open interest of the market in index options, whichever is higher, per exchange. The limit is applicable on open positions in all option contracts on a particular underlying index.

ii.    FII position limit in all index futures contracts on a particular underlying index is the same as mentioned above for FII position limits in index option contracts. This limit is applicable on open positions in all futures contracts on a particular underlying index.

 

In addition to the above, Fils can take exposure in equity index derivatives subject to the following limits:

i.      Short positions in index derivatives (short futures, short calls, long puts) not exceeding (in notional value) the Fils holding of stocks.

ii.    Long positions in index derivatives (long futures, Long calls and short puts) not exceeding (in notional value) the Fils holding of cash, government securities, and T-Bills and similar instruments.

The FIis should report to the clearing member (custodian) the extent of the Fils holding of stocks, cash, government securities, T-Bills and similar instruments before the end of the day. The clearing Member (custodian) in turn should report the same to the exchange. The exchange monitors the FII position limits. The position limit for sub-account is same as that of client level position limits.

 

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