SEBI increases position limits for trading members in index F&O contracts

India’s capital market regulator Securities and Exchange Board of India (SEBI) on Tuesday, October 15, announced an upward revision in the position limits for trading members in the index futures and options (F&O) contracts.

SEBI in a release said the position limits for trading members, cumulatively for client and proprietary trades, in index F&O contracts are now set at ₹7,500 crore or 15 per cent of the total open interest (OI) in the market, whichever is higher. Earlier it was ₹500 crore or 15 per cent of the total OI in the market.

“Master Circular on Stock Exchanges and Clearing Corporations (SECC), dated October 16, 2023, specifies the overall position limit at the Trading member (TM) level (proprietary + client) to be higher of ₹500 crores or 15% of the total Open Interest in market. This position limit is separately applicable for all open positions on futures and options contracts, in a particular underlying index,” the regulator said in a release.

As per the current practice, the position limits will be applicable for index futures and index options separately, SEBI added. 

SEBI also noted that the open interest of both the participants and the market is dynamic and changing throughout the day. In order to provide better clarity to market participants, SEBI has decided to implement a few measures.

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

Further, in the case of a drop in market OI compared to the previous day’s market OI, market participants may breach the specified limits even if their positions remain unchanged throughout the day, said the regulator, adding that for such cases of passive breaches, market participants would not be penalised and neither required to unwind their positions.

Date of Implementation

The new rule regarding the increase in position limit will come into effect immediately. The rules regarding monitoring of position limits will come into force from April 1, 2025.