Sebi increases index F&O position limits for trading members to Rs 7,500 crore

Sebi has raised the position limits for trading members in index Futures & Options contracts to 15% of the total open interest (OI) in the market or above Rs 7,500 crore. These limits will apply cumulatively for client and proprietary trades and will be separately applicable for index futures and index options, in line with current practices, a circular released by the capital markets regulator on Tuesday, said. Earlier, it was Rs 500 crore or 15% of the total OI in the market.

According to the Sebi circular, monitoring of the equity derivatives segment, including index and stocks, will be based on the total open interest of the market at the end of the previous day's trade. It is important to note that the open interest of both participants and the market is fluid and undergoes changes throughout the day. 

"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," the circular said.

It added: "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."

The new rule for increasing position limits will be operational immediately. Monitoring rules for position limits will be enforced starting on April 1, 2025.

In case of a drop in market OI compared to the previous day’s market OI, the Sebi said 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," Sebi said.