SEBI Index supports Delta-based limits in contact with derivatives

According to people familiar with the discussions, the panel of India’s Securities Regulator has recommended a new way of calculating the value of the options and futures remaining and increasing conditions.

At a meeting held on Wednesday, the Securities and Exchange Board, the India F -India Committee, confirmed the proposal to use the Delta – a risk criteria that estimate the change in the price of derivation compared to the security – to measure the size of the traders. Currently, it is calculated by adding the value of all the rest of the contract, which is a common practice worldwide.

Delta-based approach will come with new limitations on final-day index derivatives exposure, which the committee recommended the same set of Rs 100 billion ($ 1.2 billion) and a net set of Rs 15 billion per pay FIRM, people said that the discussions are not sensitive. It is much higher than a total of Rs 15 billion and a net of Rs 5 billion, which the regulator indicated in the discussion paper released in February.

With the proposed changes, SEBI wants to better risk the exposure to investors’ market and prevent any possible manipulation in the world’s largest derivatives market through contract. The current method that uses the imaginary value will not always be able to accurately reflect the actual contact, he said.

The recommendation of the consultant panel is not final, and the regulator can still shock the final rules, people said. If the changes go ahead, the next step will be to issue a new measuring method and status limit for SEBI.

Sebi did not answer the email for the comment.

This will be the recent change for the India’s derivatives market, which has grown rapidly in recent years, and Sebi attracted foreign market producers, including Citadel Securities and OPT Ptivers, before introducing a series of curbs to prevent overwhelming speculation.

The industry organization for global derivatives, the Futures Industry Association, opposes most of the recent changes, saying they will lead to potential spread and increased instability. The group, which includes members including flow traders, Hudson River Trading and Jane Street Capital, sought the limit of the delta-adjusted position of the net of Rs 75 billion, which corresponds to the current size of India’s derivatives market.