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The Securities and Exchange Board of India (SEBI) has recently rolled out a series of measures to strengthen risk monitoring in the equity derivatives segment, aiming to curb excessive speculation and enhance market integrity. These steps come amidst concerns over high speculative activity, particularly in options trading, and the potential for systemic volatility.
Here are some of the key measures introduced by SEBI:
* Recalibration of Market-Wide Position Limit (MWPL):
* Previously based solely on a stock’s free float, the MWPL will now be the lower of 15% of the free float or 65 times the average daily delivery value (ADDV), with a minimum floor of 10% of the free float. This aims to align position limits more closely with actual trading activity and reduce unwarranted F&O bans.
* Exchanges are now required to perform intraday monitoring of MWPL utilization at least four random times during the trading session to detect sudden build-ups in positions and take appropriate actions, such as levying additional surveillance margins.
* Shift to Delta-Adjusted Open Interest (FutEq OI):
* SEBI will now measure open interest at a portfolio level by computing the net Delta-adjusted open positions across futures and options for an underlying asset. This “Future Equivalent Open Interest” (FutEq OI) provides a clearer picture of a trader’s actual market exposure and directional bets, unlike the previous notional open interest which only reflected position size.
* Stricter Rules During F&O Ban Periods:
* Once a stock enters the F&O ban period (when its MWPL utilization breaches certain limits), entities are now mandated to actively reduce their net FutEq OI. Any increase in delta exposure during this time will be considered non-compliant, even if it’s due to changes in position composition.
* Pre-Opening Session for Derivatives Contracts:
* From December 6, 2025, pre-open sessions will be introduced for derivatives contracts (initially for current-month futures and later extending to next-month contracts during rollover week). This aims to facilitate smoother rollovers and improve price discovery, mirroring the existing pre-open session in the cash market.
* New Eligibility Criteria for Derivatives on Non-Benchmark Indices:
* To prevent index manipulation and over-concentration, SEBI has tightened the eligibility criteria for launching derivatives on non-benchmark indices. Such indices must have a minimum of 14 constituents, with the weight of the top constituent not exceeding 20%, and the combined weight of the top three constituents not exceeding 45%. Constituent weights must also follow a descending order.
* Revised Individual Entity-Level Position Limits:
* Individual position limits have been revised based on the updated MWPL framework. For instance, clients and NRIs are allowed up to 10% of MWPL, trading members (proprietary) up to 20%, and trading members (proprietary + client), FPIs (Category I), and mutual funds up to 30%.
These measures are part of SEBI’s ongoing efforts to enhance risk controls, improve alignment between the derivatives and cash markets, and ensure fair and orderly participation across all market participants, ultimately safeguarding investor interest and systemic stability.

Video courtesy of ABN-AMRO

Video courtesy of ABN-AMRO