Sebi raises index F&O position limits for trading members by 15x to Rs 7,500 crore

Positions of market participants in the equity derivatives segment (index and stocks) shall also be monitored based on total open interest of the market at the end of previous day’s trade, the circular said.

The market regulator has raised the position limits for trading members (TMs), cumulatively for client and proprietary trades, in index futures and options contracts to Rs 7,500 crore or 15 percent of the total open interest (OI) in the market, whichever is higher. Position limits are calculated on the notional value of a contract.

Earlier, it was Rs 500 crore or 15 percent of the total OI in the market.

The Securities and Exchange Board of India (Sebi) informed this through a circular issued on Tuesday, October 15.

The circular said, "the overall position limit at the Trading member (TM) level (proprietary + client) to be higher of INR 500 crores or 15% of the total Open Interest (OI) in market. This position limit is separately applicable for all open positions on futures and options contracts, in a particular underlying index.

Also read: Royal Orchid: How classifying a 'subsidiary' as an 'associate' helped inflate profits by 638%

It added, "Based on the feedback received from market participants, the deliberations held in the Secondary Market Advisory Committee (SMAC) and further internal discussions, the following has been decided:

"The position limits for TMs, cumulatively for client and proprietary trades, in index Futures and Options contracts may be set at higher of INR 7,500 crore or 15% of the total OI in the market.

"As per the extant practice, the position limits will be applicable for index futures and index options separately."

This direction will come into immediate effect.

The circular also said that the mechanism for monitoring the position limits will be changed. This will come into effect from April 1, 2025.

The circular stated, "In conformity with the extant practice in currency derivatives segment, positions of market participants in the equity derivatives segment (index and stocks) shall also be monitored based on total open interest of the market at the end of previous day’s trade."

It added, "In case of a drop in market OI compared to the previous day’s market OI, market participants may breach the specified position limits even if their positions have remained unchanged throughout the day.

"For such cases of passive breaches, market participants would not be penalised and not be required to unwind their positions."