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The Securities and Exchange Board of India (SEBI) has recently introduced a series of measures to strengthen risk monitoring in the equity derivatives segment. These reforms, announced via a circular on May 29, 2025, come amidst increasing retail participation and record trading volumes in the F&O market.
Key measures include:
* New Method to Measure Open Interest (OI): Instead of simply counting notional positions, SEBI will now measure open interest using a Delta-adjusted Future Equivalent (FutEq) approach. This provides a more risk-sensitive metric by adjusting each position based on its sensitivity to the underlying asset’s price movements. Open Interest of participants will be measured at a portfolio level by computing the net Delta adjusted open positions across futures and options for an underlying.
* Revised Market-Wide Position Limits (MWPL): The method for calculating MWPL for single stock derivatives has been recalibrated to better align with the actual liquidity in the cash market. The new MWPL will be the lower of 15% of the stock’s free-float market capitalization or 65 times its Average Daily Delivery Value (ADDV) in the cash market, with a floor of 10% of free float.
* Stricter Rules During F&O Ban Period: Once a stock enters the F&O ban period (when its MWPL utilization exceeds 95%), entities will be required to actively reduce their net FutEq OI. Any increase in delta exposure during this time will be deemed non-compliant, even if due to changes in position composition.
* Intraday Monitoring of MWPL: Stock exchanges are now mandated to conduct intraday monitoring of MWPL utilization at least four random times during the trading session. This real-time surveillance aims to detect sudden build-ups in positions and trigger early warning systems, including additional surveillance margins or scrutiny of participant-level concentration.
* Increased Position Limits in Index Derivatives: SEBI has increased position limits for index derivatives. For index options, the net end-of-day FutEq position is capped at Rs 1,500 crore, while gross long and short positions cannot exceed Rs 10,000 crore each. These limits will be phased in from July to December 2025.
* Extended Pre-Open Session: The pre-open session will be extended to current-month futures contracts on both single stocks and indices, mirroring the modalities of the cash market’s pre-open and post-closing sessions.
* Tighter Eligibility Criteria for Non-Benchmark Indices: To prevent index manipulation, SEBI has tightened eligibility criteria for launching derivatives on non-benchmark indices. Requirements now include a minimum of 14 constituents, caps on the weight of top stocks, and a descending order of constituent weights to ensure balanced representation.
These measures are designed to enhance trading convenience, strengthen risk monitoring, improve alignment with the cash market, and ensure fair and orderly participation in the equity derivatives segment. The changes will be phased in between July and December 2025, allowing institutions to adjust their systems and processes.

Video courtesy of ABN-AMRO

Video courtesy of ABN-AMRO