CIRCULAR
SEBI/HO/MRD/TPD-1/P/CIR/2025/79 May 29, 2025
To
All Stock Exchanges
All Clearing Corporations
(Except Commodity Derivatives Exchanges and Clearing Corporations)
Sir/Madam,
Measures for Enhancing Trading Convenience and Strengthening Risk
Monitoring in Equity Derivatives
1. Derivatives market enables efficient price discovery, improved market liquidity and
permits investors to manage risk. Stock Exchanges and Clearing Corporations
(CCs) together provide the platform and products for trading in derivatives market,
while ensuring online real time risk management, adequate surveillance, as well
as smooth settlement of trades.
2. The role of product offering, risk management, and surveillance by Stock
Exchanges and Clearing Corporations is crucial in ensuring integrity of securities
market ecosystem. This is specifically pertinent in view of the evolving market
dynamics in derivatives segment in recent years, with increased retail participation,
offering of short tenure index options contracts, and heightened trading volumes in
index derivatives on expiry day. Regulation 28 (2) read with Part–C of Schedule II
of the Securities Contracts (Regulation) (Stock Exchanges and Clearing
Corporations) Regulations, 2018 (SECC Regulations, 2018), considers Risk
Management, Surveillance, and Product development functions of Stock
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Exchanges and Clearing Corporations as core functions. In addition, Clearing and
Settlement is considered as a core function of Clearing Corporations.
3. The Securities and Exchange Board of India Act, 1992 (“SEBI Act”) mandates SEBI
to protect the interest of investors in securities and to promote the development of,
and to regulate the securities market, by such measures as it thinks fit. One of the
means to achieve the aforesaid mandate as provided in the SEBI Act is to regulate
the market through measures that enables regulating the business of Stock
Exchanges.
4. In order to review the existing regulatory measures for investor protection while
ensuring the orderly development and strengthening of equity Futures and Options
(F&O) market, as well as to identify measures to assist Stock Exchanges in
carrying out their aforementioned core functions, SEBI deliberated the matter with
Expert Working Group (EWG) on derivatives, to improve risk metrics for the
following objectives:
4.1. Better monitoring and disclosure of risks in F&O
4.2. Reduce instances of spurious F&O ban periods in single stocks
4.3. Better oversight over the possibility of concentration or manipulation risk in
index options
5. On the basis of the measures recommended by the EWG, a consultation paper
was issued by SEBI on February 24, 2025, in the matter. The comments received
were examined by SEBI and the matter was further deliberated in Secondary
Market Advisory Committee (SMAC) along with Stock Exchanges and CCs. Based
on the deliberations, it has been decided to put in place the following measures to
strengthen the equity derivatives framework (Implementation timelines provided at
Para 6 of the circular):
5.1. Formulation of Open Interest
5.1.1. Open Interest (OI) of the participants in derivatives shall be measured at
a portfolio level by computing the net Delta adjusted open positions across
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futures and options for an underlying at a given point in time. Delta denotes
sensitivity of price movement of derivative position with respect to that of
the underlying. Accordingly, long futures have a delta of +1 times notional.
For options, delta will range between 0 and +1 times notional for long calls
and between 0 and –1 times notional for long puts. In case of short options
position, effective delta for short calls is negative and that of short put is
positive.
5.1.2. Gross addition of such net Future Equivalent Open Interest (FutEq OI)
across all Unique Client Codes (UCCs) would form the FutEq OI for the
Stock/Index Derivatives, as illustrated in Table 1 below.
Table 1: Illustration of FutEq OI for various F&O positions
Long Delta Long Delta Short Delt
Long Positio of Positio of Positio a of Short Noti
Position n in long n in long n in Put Put Positio Delta onal FutEq
Scrip 1 i n F u tures Call Call Put Put n in Call of call OI OI
Client 1 300 300 300
Client 2 500 0.5 500 250
Client 3 300 500 0.5 400 -0.5 1200 350
Client 4 -400 -0.5 -400 0.5 800 0
Market wide OI 2800 900
5.1.3. CCs have been disseminating FutEq OI for all the scrips/indices on their
websites and have been intimating entity level FutEq OI to participants
through their portal. The same shall be continued for the instant purpose.
5.2. Definition of Market Wide Position Limit (MWPL)
5.2.1. As per Clause 3.3.2.1.1 of Chapter 5 of the SEBI Master Circular for Stock
Exchanges and Clearing Corporations dated December 30, 2024, MWPL
for single stocks (i.e. aggregate open positions in all futures and all options
contracts on a particular underlying stock) is 20% of the number of shares
held by non-promoters in the relevant underlying security (i.e. free float
holding).
5.2.2. It has been decided to calibrate it to the new formulation of OI
measurement and also link it to cash market activity in the following way:
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5.2.3. The MWPL shall be lower of 15% of free float and 65x Average Daily
Delivery Value (ADDV) across CCs with a floor limit of 10% of free float.
5.2.4. This metric shall be recalculated every three months based on the rolling
ADDV for the preceding three month period.
5.2.5. Tying the MWPL to cash market delivery volume will reduce the potential
manipulation and better align derivatives risk with the underlying cash
market liquidity.
5.2.6. As per Clause 3.3.2.1.2.1 of Chapter 5 of the SEBI Master Circular dated
December 30, 2024, the Stock Exchanges are required to test, at the end
of the day, whether the market wide Open Interest for any scrip exceeds
95% of the MWPL for that scrip. Henceforth, Stock Exchanges/CCs shall
test whether the market wide FutEq OI for any scrip exceeds 95% of the
proposed MWPL for that scrip.
5.3. Position Creation for Single Stocks during Ban Period
5.3.1. As per Clause 3.3.2.1.2.1 of Chapter 5 of the SEBI Master Circular dated
December 30, 2024, once the market wide Open Interest for any scrip
exceeds 95% of the MWPL for the scrip, the members/clients shall trade
only to decrease their positions through offsetting positions (this is called
ban period).
5.3.2. It has been decided that any trading done by entities in the derivatives
contracts of a scrip, subsequent to its entry in the ban period, should result
in reduction of FutEq OI on end of day basis. For instance, if delta position
is (+10) or say (-10) at the end of day 1, then it could be reduced till 0 by
end of day 2. Change in sign of delta value would not be considered an
acceptable instance of reduction of delta position. Further, passive
increase in FutEq OI on account of movement in the scrip shall not be
considered a breach.
5.3.3. For illustration, assume the position of an entity at the end of day 1 when
the scrip went in to ban period in derivatives, as mentioned in the table
below. For subsequent days, the examples of permissible behavior from
the perspective of delta reduction is illustrated in Table 2:
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Table 2: Illustration of position creation during ban period
Day EoD Position Comments
1 Long Futures 1 lot Stock went into ban period EoD day
1. Delta position is positive. Any
decrease till 0 is permissible on
subsequent days.
2 Long Futures 1 lot (with Passive increase in EoD delta by
underlying appreciating 5% as no new position is created.
by 5%) Permissible.
3 Long Futures 1 lot + Long Overall delta reduction as long put
Put option 1 lot has negative delta. Permissible.
4 Long Futures 1 lot + Long Further delta reduction as short call
Put option 1 lot + Short has negative delta. As long as EoD
OTM Call option 1 lot delta above 0, permissible.
5 Long Futures 2 lot + Long Additional Delta creation in positive
Put option 1 lot + Short side compared to previous day. Not
Call option 1 lot permissible.
5.3.4. CCs to prepare a joint SOP, in consultation with SEBI, for monitoring the
end of day delta position of entities and penalty structure thereof in this
regard within one month from the date of the circular (Implementation date
of this measure is mentioned at Para 6 of the circular).
5.4. Intraday monitoring of MWPL utilization for single stocks
5.4.1. To safeguard market integrity and limit settlement risk from intraday spikes
in FutEq OI, Stock Exchanges shall perform intraday monitoring of MWPL
utilization at least four random times during the trading session to:
5.4.1.1. take appropriate actions once OI utilization breaches certain limits
such as levying Additional Surveillance Margin, monitoring for entity
level concentration, additional surveillance checks etc.
5.4.1.2. report instances of significant utilization of MWPL / breach of MWPL
to SEBI in the fortnightly Surveillance meeting.
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5.4.2. Stock Exchanges shall prepare a joint SOP, in consultation with SEBI, in
this regard within one month from date of the circular (Implementation date
of this measure is mentioned at Para 6 of the circular).
5.5. Position Limits for Index Futures and Index Options
5.5.1. In order to strike a balance between market stability / fear of manipulation
of underlying constituents associated with a large size index position and
the ability to take meaningful exposure by participants, following limits
have been stipulated for index options at PAN level:
5.5.1.1. Net end of day FutEq OI limit for options to be ₹1,500 cr. and gross
FutEq OI to be ₹10,000 cr. (i.e. neither gross long FutEq OI nor gross
short FutEq OI shall exceed ₹10,000 cr.).
5.5.1.2. Stock Exchanges shall prepare a joint SOP, in consultation with SEBI,
to strictly monitor intraday positions and trading activities of major
participants from the perspective of market integrity / surveillance
concerns and take appropriate measures.
5.5.2. In order to facilitate market participants to take meaningful market wide
exposure and to develop index futures segment further, following position
limits are stipulated for index futures:
5.5.2.1. FPI Category I / Mutual Funds / Trading Member (Proprietary) /
Clients - higher of 15% of futures OI for that index or ₹500 cr.
5.5.2.2. FPI Category II (other than individuals, family offices and corporates)
- higher of 10% of futures OI or ₹500 cr.
5.5.2.3. FPI Category II (Individuals, family offices and corporates) higher of
5% of futures OI or ₹500 cr.
5.5.2.4. The above stated position limits for index futures would be measured
on gross notional basis.
5.5.2.5. As Open Interest of both the participants and the market is dynamic
and changing throughout the day and with a view to provide better
clarity to the market participants in terms of their position limits, the
following has been decided:
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5.5.2.5.1. Positions of market participants in the equity derivatives segment
(index) shall also be monitored based on total Open Interest of
the market at the end of previous day’s trade.
5.5.2.5.2. 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/reduced
throughout the day.
5.5.2.5.3. Such cases of passive breaches shall not be considered as
violation.
5.5.3. In line with existing practice, in addition to the above specified position
limits for index options and index futures, entities shall be allowed to take
additional exposure in equity index derivatives subject to the following:
5.5.3.1. Aggregate short positions in index derivatives (short futures, short
calls and long puts) shall not exceed (FutEq terms for Index options
and gross notional terms for Index futures) the holding of stocks.
5.5.3.2. Aggregate long positions in index derivatives (long futures, long calls
and short puts) shall not exceed (FutEq terms for Index options and
gross notional terms for Index futures) the holding of cash and cash
equivalent, government securities, T-Bills and similar instruments.
5.5.3.3. Stock Exchanges / CCs shall prepare a joint SOP, in consultation with
SEBI, for monitoring the positions of entities including the
penalty/additional surveillance margin framework for entities
breaching the position limits. The SOP shall be prepared within 30
days from the date of the Circular and shall also cover the reporting
framework for entities taking additional exposure beyond the limits
prescribed at para 5.5.3.1 and 5.5.3.2 of the Circular.
5.5.4. Considering that market participants may be in the process of designing
systems to monitor their FutEq OI, in discussion with market participants
and Stock Exchanges/CCs, following glide path for implementing aforesaid
position limits for index options, shall be provided by Stock Exchanges
w.e.f. July 01, 2025:
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5.5.4.1. By 9 PM on each trading day (T), Stock Exchanges shall intimate the
entities (and their TM/CM) if the FutEq OI in options on any index is
beyond the permissible limit (i.e. ₹1,500 cr. net or ₹10,000 cr. gross
long / gross short as mentioned at Para 5.5.1.1 above).
5.5.4.2. If the entity has long position beyond permissible limits then cash (or
cash equivalent) would be required to be intimated to Stock
Exchanges / CCs by 12 noon next trading day (T+1).
5.5.4.3. If the entity has short position beyond permissible limits after
considering the security holding value of T day or long position
beyond permissible limits after considering the cash / cash equivalent
reported by 12 noon on T+1 day, the entity will have to bring down
options positions within permissible limit by end of T+1, as per delta
value of derivatives contracts as of end of T+1.
5.5.4.4. If entities don’t have systems to compute same day delta, bringing
end of day position on T+1 day within the permissible limit with T day
market close data provided by Stock Exchange for various derivatives
contracts, shall also be considered acceptable.
5.5.4.5. If the entity fails to reduce the position within the permissible limit on
T+1 day, as mentioned above, the same would attract Additional
Surveillance Deposit/Penalty as decided by Stock Exchanges.
5.5.4.6. The aforesaid glide path will be applicable till December 05, 2025,
post which entities willing to take large delta based positions in index
options are expected to have their own delta computing / monitoring
system.
5.5.4.7. Subsequent to December 05, 2025, the end of day excess position in
index options on each day shall be checked by exchanges against the
holding of securities / reported cash or equivalent on that day. Excess
position beyond permissible limits, will attract Additional Surveillance
Deposit/Penalty, as decided by Stock Exchanges.
5.5.4.8. It is emphasized that the provision of one day to reduce the position
beyond permissible limit is only with the intention to provide time to
implement delta monitoring system by entities / trading members who
wish to take positions close to or beyond permissible limit. It would
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not impact typical retail traders / investors. To that extent, Stock
Exchanges shall discuss the instances of entities repeatedly taking
excess position for a day in fortnightly surveillance meeting with SEBI
to ensure that the instant glide path is not misused by any entity to
take large overnight positions beyond permissible limit.
5.5.4.9. Stock Exchanges/CCs shall submit a joint SOP to SEBI for
operationalizing position limit monitoring during the aforesaid glide
path within one month from the date of circular. The said SOP shall
also include details of appropriate measures to be taken by Stock
Exchanges in case of repeated instances of position creation by
entities beyond permissible limit for one day.
5.5.4.10. Clauses 1.3.2, 1.3.3, 1.3.4 and 1.3.5 of Chapter 5 of SEBI Master
Circular for Stock Exchanges and Clearing Corporations dated
December 30, 2024 provide for position limits for index futures and
Clauses 2.3.2, 2.3.3 and 2.3.4 provide for position limits for index
options. These clauses are modified to account for the stipulation on
position limits for index options and index futures and are reproduced
at Annexure-1 of the Circular.
5.6. Pre-open session for the derivatives market
5.6.1. The pre-open session to be extended to current-month futures contracts
on both single stocks and indices, mirroring the modalities of the cash
market’s pre-open and post-closing sessions.
5.6.2. In the last five trading days before expiry, these sessions shall extend to
next-month futures contracts as liquidity shifts from one expiry to the other
on account of rollover of futures contracts.
5.7. Eligibility criteria for Derivatives on Non-Benchmark indices
5.7.1. In addition to the existing eligibility criteria for derivatives on indices,
specified in Clause 1.1.2 of Chapter 5 of SEBI Master Circular for Stock
Exchanges and Clearing Corporations dated December 30, 2024, Stock
Exchanges shall follow the following prudential norms before introducing
derivatives on non-benchmark indices:
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5.7.1.1. Minimum of 14 constituents.
5.7.1.2. Top constituent’s weight ≤ 20%
5.7.1.3. Combined weight of the top three constituents ≤ 45%
5.7.1.4. All other constituents’ individual weights must be lower than those
of the higher-weighted constituents (i.e., a descending weight
structure).
5.7.2. Exchanges shall evaluate and ensure compliance with the aforesaid
additional criteria at the end of every calendar quarter. Stock Exchanges
shall submit their proposal for non-benchmark indices having derivatives
contracts on them to SEBI, within 30 days from the date of the circular.
5.8. Individual Entity-Level Position Limits for Single Stocks
5.8.1. The existing combined futures and options position limits for single
stocks which are essentially linked to MWPL, as per Clause 3.3.2 and 4.3.2
of Chapter 5 of SEBI Master Circular for Stock Exchanges and Clearing
Corporations dated December 30, 2024, are recalibrated to the new
definition of MWPL as follows:
5.8.1.1. Client / NRI: 10% of MWPL
5.8.1.2. Trading Member (Proprietary): 20% of MWPL
5.8.1.3. Trading Member (Proprietary + Client) / FPI (Category I) / MF: 30%
of MWPL
5.8.1.4. FPI (Category II - other than FPIs in sub-category individuals, family
offices, corporates): 20% of MWPL
5.8.1.5. FPI (Category II - FPIs in sub-category individuals, family offices,
corporates): 10% of MWPL
5.8.1.6. To address the issue of entity holding significant percentage of OI
in the scrip, Stock Exchanges / CCs shall prepare a joint SOP, in
consultation with SEBI, to monitor such position of top entities and
take appropriate measures in case of surveillance / market stability
concerns arising out of concentrated / outsized positions both at
delta level and notional level.
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6. Phased implementation of proposals:
In line with discussions with Stock Exchanges / CCs and other stakeholders, and
in order to provide adequate time to market participants for shifting to FutEq OI,
the phased implementation timelines are as under:
Sr. No Para Brief description of the measure Effective From
1 5.1 Formulation of FutEq Open Interest Already implemented
2 5.2 Definition of Market Wide Position October 01, 2025
Limit
3 5.3 Position creation for Single Stocks October 01, 2025
during Ban Period
4 5.4 Intraday monitoring of MWPL November 03, 2025
utilization for single stocks
5 5.5 Position Limits for Index Futures July 01, 2025
Position Limits for Index Options July 01, 2025 to
(glide path implementation) December 05, 2025
Position Limits for Index Options December 06, 2025
(normal implementation)
6 5.6 Pre-open session for the derivatives December 06, 2025
market
7 5.7 Eligibility criteria for Derivatives on November 03, 2025
Non-Benchmark indices
8 5.8 Individual Entity-Level Position Limits October 01, 2025
for Single Stocks
(In general, implementation dates are aligned with monthly compliance mock sessions conducted by
Stock Exchanges which happen on first Saturday of the month).
7. Stock Exchanges and Clearing Corporations are directed to take necessary steps
to put in place systems for implementation of this Circular, including necessary
amendments to the relevant bye-laws, rules and regulations, if any.
8. This circular is being issued in exercise of powers conferred under Section 11(1)
read with Section 11(2)(a) of the SEBI Act, 1992, read with Regulation 51 of SECC
Regulations, 2018, to protect the interests of investors in securities and to promote
the development of, and to regulate the securities market.
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9. This circular is available on SEBI website at www.sebi.gov.in under the category
“Legal → Circulars”.
Yours faithfully,
Ansuman Dev Pradhan
General Manager
Technology, Process Re-engineering, Data Analytics
Market Regulation Department
PH: +91-22-26449622
Email: ansumanp@sebi.gov.in
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Annexure-1 – Clauses of Chapter 5 of SEBI Master Circular for Stock Exchanges
and Clearing Corporations dated December 30, 2024, for Position Limits in Index
Derivatives
Index Futures
1.3.2. Position Limits:
1.3.2.1. Market Level:
There are no market wide position limits specified for index futures contracts.
1.3.2.2. Trading Member(Proprietary)/ FPI/ Mutual Fund/ Client:
1.3.2.2.1. Mutual Funds / FPIs / Trading Members (Proprietary) / Clients may
take exposure in equity index derivatives subject to the following limits:
1.3.2.2.1.1. Aggregate short positions in index derivatives (short futures, short calls
and long puts) shall not exceed (FutEq terms for Index options and gross
notional terms for Index futures) the holding of stocks. The same shall be
sourced from the depositories by the Stock Exchanges.
1.3.2.2.1.2. Aggregate long positions in index derivatives (long futures, long calls and
short puts) shall not exceed (FutEq terms for Index options and gross
notional terms for Index futures) the holding of cash and cash equivalent,
government securities, T-Bills and similar instruments. The members of
the respective entities shall report the same to Clearing Corporation.
1.3.2.2.2. Further to para 1.3.2.2.1 above, additional position limits mentioned
hereunder shall be available to Trading Members (Proprietary) / FPIs /
Mutual Funds / Clients in index futures:
1.3.2.2.2.1. FPI Category I / Mutual Funds / Trading Member (Proprietary) / Clients -
higher of 15% of futures OI for that index or ₹500 cr.
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1.3.2.2.2.2. FPI Category II (other than individuals, family offices and corporates) -
higher of 10% of futures OI or ₹500 cr.
1.3.2.2.2.3. FPI Category II (Individuals, family offices and corporates) higher of 5% of
futures OI or ₹500 cr.
1.3.2.2.3. The above stated position limits for index futures would be measured on a
gross notional basis. The position limits shall be computed on a gross basis
at the level of MF and on a net basis at the level of FPI/client/sub-schemes
of MF and proprietary positions.
1.3.2.2.4. Stock Exchanges / CCs shall prepare a joint SOP, in consultation with SEBI,
for monitoring the positions of entities including the penalty/additional
surveillance margin framework for entities breaching the position limits. The
SOP shall also cover the reporting framework for entities taking additional
exposure beyond the limits prescribed at para 1.3.2.2.1.
1.3.2.2.5. As per existing practice, if any of the aforesaid entities exceed the respective
limits prescribed at para 1.3.2.2.1 and para 1.3.2.2.2 above, an additional
deposit shall be payable by the entity equivalent to the amount of margin
chargeable on excess position beyond the limits prescribed at para 1.3.2.2.1
and para 1.3.2.2.2. above and the same shall be retained by Stock
Exchanges for a period of 1 month”.
1.3.2.3. Trading Member (Proprietary + Client):
1.3.2.3.1. From October 15, 2024, the position limits available for Trading Member
(Proprietary + Clients) shall be higher of 15% of futures OI for that index or
₹7,500 cr.
1.3.2.3.2. The above stated position limits for index futures would be measured on a
gross notional basis.
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1.3.2.3.3. Stock Exchanges / CCs shall prepare a joint SOP including the penalty
structure, in consultation with SEBI, for monitoring the breach of position
limits by the entities.
1.3.3. Monitoring of position limits at the end of day:
1.3.3.1. FPI
1.3.3.1.1. The FPI shall report to the Clearing Member (Custodian) the extent of FPI’s
holding of cash, government securities, T-Bills and similar instruments
before the end of the day. The Clearing Member (Custodian) in turn shall
report the same to the Clearing Corporation as required in point 1.3.2.2.1.2.
1.3.3.1.2. The Stock Exchange shall monitor the FPI position limits in equity index
derivative contracts in the manner specified below:
1.3.3.1.2.1. The FPI would be required to notify the names of the Clearing Member/s
and Custodian through whom it would clear its derivative trades to
Clearing Corporation.
1.3.3.1.2.2. A unique code would be assigned by the Clearing Corporation to each
registered FPI intending to trade in derivative contracts.
1.3.3.1.2.3. The FPI would be required to confirm all its positions to the designated
Clearing Members online but before the end of each trading day.
1.3.3.1.2.4. The designated Clearing Member/s would at the end of each trading day
submit the details of all the confirmed FPI trades to the Clearing
Corporation.
1.3.3.1.2.5. The Stock Exchanges would compute the total FPI trading exposure and
monitor the position limits at the end of each trading day. The cumulative
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FPI position may be disclosed to the market by the Clearing Corporation
on a T + 1 basis, before the commencement of trading on the next day.
1.3.3.1.2.6. In the event of an FPI breaching the position limits on any derivative
contract on an underlying index, action as specified in 1.3.2.2.5 shall be
applicable.
1.3.3.1.3. The open position for index derivative contracts would be valued as the
FutEq OI multiplied with the closing price of the respective underlying in the
cash market.
1.3.3.2. Mutual Fund
1.3.3.2.1. The Mutual Fund shall notify the names of the Clearing Member/s for each
scheme through whom it would clear its derivative contracts to Clearing
Corporation. The Stock Exchange would then assign a unique client code
to each scheme of the Mutual Fund. For the purpose of monitoring of
position limits, the Mutual Funds will be considered as trading members like
registered FPIs and the schemes of Mutual Funds will be treated as clients.
1.3.4. Intra-day monitoring of position limits:
1.3.4.1. In addition to the End of Day monitoring mechanism as stated above, the
position limits, for equity index derivative contracts, would also be monitored on
an intraday basis from April 01, 2025.
1.3.4.2. For this purpose, Stock Exchanges shall consider minimum four position
snapshots during the day. The number of snapshots may be decided by the
respective Stock Exchanges subject to a minimum of 4 snapshots in a day. The
snapshots would be randomly taken during pre-defined time windows.
1.3.4.3. However, there shall be no penalty for breach of existing position limits intraday
and such intraday breaches shall not be considered as violations.
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1.3.4.4. Stock Exchanges shall prepare a joint SOP, in consultation with SEBI, to strictly
monitor intraday positions and trading activities of major participants from the
perspective of market integrity / surveillance concerns and take appropriate
measures.
1.3.5. Passive breaches of position limits:
1.3.5.1. As Open Interest of both the participants and the market is dynamic and
changing throughout the day and with a view to provide better clarity to the
market participants in terms of their position limits, the following has been
decided:
1.3.5.1.1. Positions of market participants in index future contracts shall also be
monitored based on total OI of the market in index future contracts, at the
end of previous day’s trade.
1.3.5.1.2. In case of a drop in index futures OI compared to the previous day’s index
futures OI, market participants may breach the specified position limits even
if their positions have remained unchanged/reduced throughout the day.
1.3.5.1.3. Such cases of passive breaches shall not be considered as violation.
Index Options
2.3.2. Position Limits:
2.3.2.1. Market Level
There are no market wide position limits specified for index option contracts.
2.3.2.2. Mutual Fund/ FPI/ Trading Member (Proprietary)/ Client
2.3.2.2.1. Mutual Funds / FPIs / Trading Members (Proprietary) / Clients may
take exposure in equity index derivatives subject to the following limits:
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2.3.2.2.1.1. Aggregate short positions in index (short futures, short calls and long
puts) shall not exceed (in FutEq terms) the holding of stocks. The same shall
be sourced from the depositories by the Stock Exchanges.
2.3.2.2.1.2. Aggregate long positions in index derivatives (long futures, long calls and
short puts) shall not exceed (in FutEq terms) the holding of cash and cash
equivalent, government securities, T-Bills and similar instruments. The
members of the respective entities shall report the same to Clearing
Corporation
2.3.2.2.2. Further to para 2.3.2.2.1. above, additional position limits mentioned
hereunder shall be available to Trading Members (Proprietary) / FPIs /
Mutual Funds / Clients in index options:
2.3.2.2.2.1. Net end of day FutEq limit to be ₹1,500 cr. And
2.3.2.2.2.2. Gross end of day FutEq limit to be ₹10,000 cr. (i.e. both long delta and
short delta shall not cross ₹10,000 cr. each).
2.3.2.2.3. Stock Exchanges / CCs shall prepare a joint SOP, in consultation with SEBI,
for monitoring the breach of position limits by the entities.
2.3.2.2.4. Till the aforesaid SOP is formalized, as per the exiting practice, if any of the
aforesaid entities exceed the respective limits prescribed at para 2.3.2.2.1
and para 2.3.2.2.2 above, an additional deposit shall be payable by the
entity equivalent to the amount of margin chargeable on excess position
beyond the limits prescribed at para 2.3.2.2.1 and para 2.3.2.2.2 above and
the same shall be retained by stock exchanges for a period of 1 month.
2.3.2.2.5. In terms of glide path for implementing the position limits for index options,
as stated at para 2.3.2.2.1 and para 2.3.2.2.2 above, the following
facilitation shall be provided by Stock exchanges from July 01, 2025 till
December 5, 2025:
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2.3.2.2.5.1. By 9 PM on each trading day (T), Stock Exchanges shall intimate the
entities (and their TM/CM) if the FutEq OI in options on any index is
beyond the permissible limit (i.e. ₹1,500 cr. net or ₹10,000 cr. gross
long / gross short).
2.3.2.2.5.2. If the entity has long position beyond permissible limits then cash (or
cash equivalent) would be required to be intimated to Stock Exchanges
/ CCs by 12 noon next trading day (T+1). If the entity has short position
beyond permissible limits after considering the security holding value
of T day or long position beyond permissible limits after considering the
cash / cash equivalent reported by 12 noon on T+1 day, the entity will
have to bring down options positions within permissible limit by end of
T+1, as per delta value of derivatives contracts as of end of T+1.
2.3.2.2.5.3. If entities don’t have systems to compute same day delta, bringing end
of day position on T+1 day within the permissible limit with T day market
close data provided by Stock Exchange for various derivatives
contracts, shall also be considered acceptable.
2.3.2.2.5.4. If the entity fails to reduce the position within the permissible limit on
T+1 day, as mentioned at para 2.3.2.2.5.3 above, would result in to levy
of Additional Surveillance Deposit by Stock exchanges in accordance
with para 2.3.2.2.4 above.
2.3.2.2.5.5. The above glide path will be applicable till December 05, 2025, post
which entities willing to take large delta positions in index options are
expected to have their own delta computing / monitoring system.
Subsequent to December 05, 2025, the end of day excess position in
index options on each day shall be checked by Stock Exchanges
against the holding of securities / reported cash or equivalent on that
day. Excess position beyond permissible limits, will attract Additional
Surveillance Deposit/Penalty, as decided by Stock Exchanges.
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2.3.2.2.5.6. It is emphasized that the provision of one day to reduce the position
beyond permissible limit is only with the intention to provide time to
implement delta monitoring system by clients / trading members who
wish to take excess positions close to or beyond permissible limit. It
would not impact typical retail traders / investors. To that extent, Stock
Exchanges shall discuss the instances of entities repeatedly taking
excess position for a day in fortnightly surveillance meeting with SEBI
to ensure that the instant glide path is not misused by any entity to take
large overnight positions beyond permissible limit.
2.3.2.2.5.7. Stock Exchanges / CCs shall prepare a joint SOP including details of
appropriate measures to be taken by Stock Exchanges in case of
repeated instances of position creation by entities beyond permissible
limit for one day.
2.3.2.3. Trading Member (Proprietary + Client):
2.3.2.3.1. From October 15, 2024, the position limits available for Trading Member
(Proprietary + Clients) shall be higher of 15% of options OI for that index
or ₹7,500 cr.
2.3.2.3.2. The above stated position limits for index options would be measured on
a gross notional basis.
2.3.2.3.3. Till the SOP at 2.3.2.2.3. is formulated, the extant penalty structure for
breach of overall TM level limits would continue.
2.3.2.3.4. It is also noted that that Open Interest of both the participants and the
market is dynamic and changing throughout the day. With a view of
providing better clarity to the market participants in terms of their position
limits, the following has been decided:
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2.3.2.3.4.1. The positions of market participants in index option contracts shall
also be monitored based on total OI of the market in index option
contracts, at the end of previous day’s trade.
2.3.2.3.4.2. In case of a drop in index options OI compared to the previous
day’s index options OI, market participants may breach the
specified position limits even if their positions have remained
unchanged/reduced throughout the day.
2.3.2.3.4.3. Such cases of passive breaches shall not be considered as
violation.
2.3.3. Monitoring of position limits
2.3.3.1. FPI
Same as that for index future contracts as specified in clause 1.3.3.1
2.3.3.2. Mutual Fund
Same as that for index future contracts as specified in clause 1.3.3.2
2.3.4. Intra-day monitoring of position limits
Same as that for index future contracts as specified in clause 1.3.4
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