Review of the framework of position limits for currency derivatives contracts
Summary
SEBI clarifies that position limits for currency derivatives apply only when opening a new position, allowing existing positions to remain if total open interest drops. Market participants are prohibited from increasing or creating new positions until they comply with applicable limits in such scenarios. Stock exchanges retain the power to direct participants to reduce positions for risk management purposes within prescribed timeframes.
Text
position limit linked to open interest shall be applicable at the time of opening a position. Such positions shall not be required to be unwound in the event of a drop of total open interest in a currency pair at the stock exchange.
eligible market participants shall not be allowed to increase their existing positions or create new positions in the currency pair till they comply with the applicable position limits.
stock exchanges may direct the market participants to bring down their positions to comply with the applicable position limits within the time period prescribed by the stock exchange.
para 14 of the SEBI circular CIR/MRD/DP/20/2014 dated June 20, 2014 shall stand modified.
take necessary steps to put in place systems for implementation of the circular, including necessary amendments to the relevant bye-laws, rules and regulations.
bring the provisions of this circular to the notice of the stock brokers / clearing members and also disseminate the same on their website;
communicate to SEBI the status of implementation of the provisions of this circular.
Depositories are directed to forward this circular to DDPs, who shall in turn bring the contents of this circular to the notice of the FPIs registered with them.
This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Source: SecMarx — Review of the framework of position limits for currency derivatives contracts. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.