SEBI Revises Underlying Exposure Limits for Foreign Exchange Currency Derivative Contracts
Court / Authority
SEBI & SCRA
Update / Judgement Date
05 Nov 2026
Case No.
HO/(561)2026-MRD-POD2/I/25177/2026
Source
WCP News Bulletin
Author
Soumya Gupta — WCP Legal Desk
Reading Time
2 min read
View Count
Background
● Clause 5.3.3 of the SEBI Master Circular dated December 30, 2024, prescribed position limits for currency derivative contracts and conditions for establishing underlying exposure.
● RBI issued A.P. (DIR Series) Circular No. 25 on October 10, 2026, updating threshold limits, cancellation/rebooking rules, and documentation requirements for hedging contracted exposures.
● SEBI issued this circular to harmonize exchange-traded currency derivative limits with RBI's updated foreign exchange risk management framework.
What Has Changed
Provision Earlier Position New Position Effective From
Clause 5.3.3.1 - Standalone/Unhedged Limit Regulated under Master Circular dated Dec 30, 2024 Combined single limit of USD 5 million equivalent notional value across all recognized stock exchanges without requiring underlying exposure November 05, 2026
Clause 5.3.3.2 - FPI Short Position Limit Subject to previous limits under Master Circular Short positions across all FCY-INR contracts restricted to a maximum of USD 5 million November 05, 2026
Clause 5.3.3.4 - FPI Long Position Requirements Subject to earlier disclosure and exposure norms Long positions above USD 5 million mandate underlying exposure in Indian debt, equity, or mutual fund units November 05, 2026
Clause 5.3.3.5 - Domestic Client Exposure Above USD 5M Governed by earlier RBI / SEBI guidelines Allowed subject to RBI Master Direction (July 05, 2016, as amended) and RBI Circular No. 25 (Oct 10, 2026) November 05, 2026
Compliance Action Points
1. Stock exchanges and clearing corporations must immediately update systems and amend relevant bye-laws, rules, and regulations.
2. Stock exchanges must issue notifications to bring these revised provisions to the attention of stockbrokers, clearing members, and market participants via their official websites.
3. Clearing corporations and exchanges must formally report the status of implementation of these revised limits to SEBI.
4. FPIs must monitor total open positions across all exchanges to ensure unhedged short positions do not cross USD 5 million and long positions above USD 5 million are backed by eligible underlying securities.
Full Judgement / Attachment
Full Judgement
Frequently asked questions about SEBI & SCRA
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