MUMBAI: Several changes related to equity derivatives will take effect from Wednesday (October 1), primarily aimed at stricter regulation and risk management by introducing a new definition of market-wide position limit (MWPL), position in a stock during the ban period, intraday monitoring of position limits in index options, and individual entity level position limits for single stocks.
These steps are part of the regulator Sebi’s broader push to curb excessive speculation and strengthen market stability in the equity derivatives segment.
The market-wide position limit or the maximum number of bets allowed, will now be linked to the cash volume and free float of the scrip, to curb excessive concentration of positions, and has been fixed at a low 15% of free-float or 65x the cash volume across exchanges.
The current MWPL formula is based on the 20% of the shares held by non-promoters in a scrip. This metric is recalculated every three months, based on the rolling cash volume for the preceding three-month period. Sebi expects that by tying the MWPL to cash market delivery volume, it may reduce manipulation and better-align derivatives risks with underlying cash market liquidity.
To curb oversised exposures in index derivatives, net intraday positions will be capped at Rs 5,000 crore per entity and gross intraday positions at Rs 10,000 crore from Wednesday.
Exchanges have been asked to monitor positions through at least four random snapshots during the trading session. On expiry days, breaches will attract penalties or surveillance deposits, though additional exposures will be allowed if fully backed by securities or cash collateral. Penal provisions for expiry-day breaches will apply from December 6, 2025.
Also, from Wednesday, trades will be allowed in F&O stocks even during the ban period if it reduces the risk of portfolio. According to Sebi subsequent to a scrip’s entry in the ban period, it should result in reduction of the open interest in that particular equity futures on an end-of-the-day basis. Currently, if a stock enters the ban period, no fresh positions can be created.
Once the market-wide open interest for any share exceeds 95% of the MWPL for the underlying scrip, brokers and traders can trade only to decrease their positions through offsetting positions.
Another main change is new position limits for single-stock derivatives introduced at 10% of the MWPL for individuals, 20% for proprietary brokers, and 30% overall for FPIs and brokers.
Apart from these measures, announced in May 2025, Sebi has also said additional steps will be rolled out in phases to curb the derivatives. From November 3 onwards new eligibility norms will apply to derivatives on non-benchmark indices, and from December 6, pre-open and post-closing sessions will be introduced for the F&O segment too.
These measures are part of the Sebi’s broader push to curb excessive speculation and strengthen market stability in the F&O segment. The measures follow a May 2025 circular, some of which came into effect from July, with the rest now being rolled out in phases.
In recent years, Sebi has been taking measures to cool down speculative activity by reducing the number of weekly expiries, increasing lot sizes, removing calendar spread benefits on expiry days, mandating upfront premium collection from option buyers, and tightening intraday monitoring.