The Securities and Exchange Board of India (Sebi)  today withdrew some of the measures it introduced in March to stem the excessive volatility, including increase in margin on non-derivative segment stocks, in the stock market. In March, when benchmark indices triggered the lower circuit limit twice in 10 days, the capital markets regulator had brought additional curbs that helped pacify market participants demanding a complete ban on short selling like in other countries.

Among the steps it had introduced, the regulator has most notably withdrawn a measure related to increases in the margin requirement for stocks that are not part of the futures and options segment. Earlier, SEBI had asked stock exchanges to charge as much as 40% margin on cash segment stocks, which moved 10% for three consecutive days in a month. Similarly, the regulator has withdrawn a measure that had reduced the marketwide position limit of highly volatile derivatives segment stocks to 50% from 95% earlier.

The Sebi will persist with the limit placed on institutional investors and proprietary traders on taking positions in index derivatives. In March, the regulator had said institutional investors, proprietary traders, and clients could only take short positions on index derivatives to the extent of the stock holdings. Similarly, their ability to undertake long positions on index derivatives was also limited to the sum of their holdings of cash, government securities, treasury bills, and other liquid instruments. Furthermore, any additional positions taken by institutional investors, proprietary traders, and clients was limited to 5 bln rupees in index futures contracts and options contracts each.

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