SEBI issues Circular to review position limits in interest rate derivatives

Sep 27, 2019 | by Avantis RegTech Legal Research Team


The Securities and Exchange Board of India (SEBI) on September 26, 2019, has issued a Circular in order to review the extant position limits in Interest Rate Derivatives (IRD). SEBI has referred Circulars CIR/MRD/DRMNP/35/2013 dated December 5, 2013, CIR/MRD/DRMNP/ 2/2014 dated January 20, 2014 and CIR/MRD/DRMNP/11/2015 dated June 12, 2015 on frameworks for trading of Cash settled IRD on Stock Exchanges to review the position limits, those are:

Ø     Banks and primary dealers dealing as clients shall have same position limits as are applicable to trading members.

Ø   Institutions belonging to Category I and II FPIs shall have same position limits as are applicable to Trading Members, whereas non-institutions belonging to Category II FPI (individuals, family offices and companies) shall have same position limits as are applicable to clients.

Ø     Position limits have been revised for Interest Rate Derivatives falling in 8-11 years residual maturity bucket. The revised positions are as under:

Categories

Position limits for 8-11 year bucket

Position limits each for 4-8 and 11-15 years bucket

Trading members, institutions in Category I and II FPIs (i.e. other than individuals, family offices and companies), banks and Primary Dealers, Mutual Funds (at AMC level), Insurance Companies, Pension Funds and Housing Finance companies

10% of Open Interest or INR1,200 crore whichever is higher.

10% of Open Interest or INR 600 crore whichever is higher.

Non-institutions in Category II FPIs (i.e. individuals, family offices and companies), Mutual Fund (Scheme level) and other clients

3% of Open Interest or INR 400 crore whichever is higher.

3% of Open Interest or INR 200 crore whichever is higher.

This Circular shall come into force with immediate effect.

[SEBI Circular No. SEBI/HO/MRD/CIR/P/2019/103]


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