The measures are aimed at ensuring orderly trading and settlement, effective risk management, price discovery, and maintenance of market integrity.
Globally, the stock markets have been quite volatile owing to concerns relating to COVID-1 pandemic and the resultant fear of economic slowdown. The movement in the Indian stock market has been broadly in tandem with the other global markets, the Sebi said in a statement.
Taking note of the continued abnormally high volatility in the market, Sebi has come up with various measures, including revision of market wide position limit, to ensure orderly trading and settlement, effective risk management, price discovery and maintenance of market integrity.
These measures will kick-in from the beginning of trading on Monday (23 March 2020) and will be in effect for a period of one month. The position would be reviewed thereafter and appropriate view taken thereon.
Sebi has revised market wide position limit (MWPL). For stocks in F&O segment meeting certain criteria, MWPL may be revised to 50% of the existing levels.
The margin for stocks meeting specific criteria will be increased, apart from having revised position limits in equity index derivatives (futures and options).
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Sebi also proposed to raise margin for non-F&O stocks in cash market to 40% in a phased manner. The proposed margins would only be applied in the cash market and may be applicable for a period of one month.
The regulator also proposed flexing of dynamic price bands for F&O stocks. Currently, the bands are relaxed in the event of market trends in either direction. In addition to the existing requirements, the dynamic price bands may be flexed only after a cooling-off period of 15 minutes from the time of meeting the existing criteria specified by stock exchanges for flexing.
Sebi and stock exchanges will continuously monitor the market developments and review the position and take any further suitable actions as may be required.
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