The Securities and Exchange Board of India (Sebi) has announced a fresh set of rules for the derivatives segment, revamping how open interest (OI) and market-wide position limits (MWPL) are calculated. The updated framework is aimed at improving risk monitoring, curbing potential manipulation in index options, and reducing the frequency of stocks entering the futures and options (F&O) ban list.
The changes will be implemented gradually through a glide path, with eight key measures coming into effect on different dates between July and December.
Under the new norms, OI will no longer be based simply on gross positions. Instead, it will be computed at a portfolio level by calculating the net delta-adjusted open positions across F&O contracts. Delta here refers to the degree of price sensitivity of the derivative in relation to its underlying asset.
The gross addition of these net positions — also known as Future Equivalent Open Interest (FutEq OI) — across all Unique Client Codes (UCCs) will now form the base for determining the OI in stock or index derivatives.
Sebi has also modified the way MWPL is set. Going forward, it will be the lower of 15% of a stock’s free float or 65 times its average daily delivery value (ADDV), with a minimum threshold of 10% of free float. This new formula ties the position limit more closely to delivery-based volumes in the cash market, with the intention of limiting speculative build-up. MWPL will be reviewed every quarter based on a rolling ADDV.
To prevent sudden spikes in position build-up, stock exchanges will carry out random intraday checks — at least four times a day — to track MWPL utilisation. If limits are breached during these checks, exchanges will be able to initiate timely action to control settlement risks.
For index options, a separate cap has been introduced. The net end-of-day FutEq OI has been limited to ₹1,500 crore per participant, with a gross cap of ₹10,000 crore.
Sebi had originally floated these proposals through a consultation paper, which triggered concerns among traders that the changes could dampen market activity. F&O volumes have already seen a 30% decline from their peak. However, following discussions with market participants, Sebi revised parts of the proposal before finalising the framework.
