SEBI introduces stricter Futures and Options position, monitoring norms from Oct 1
India’s markets regulator, SEBI, is rolling out tougher rules for derivatives trading starting October 1. These changes focus on tighter position limits, better monitoring, and updated guidelines for handling stock positions during ban periods in futures and options (F&O) markets.
The goal? To curb wild speculation and make sure risks in derivatives stay in sync with real trading activity in the cash market. SEBI wants to keep things fair and reduce chances of market manipulation.
At the heart of the updates is the market-wide position limit (MWPL), which sets the max number of contracts traders can hold. Now, it’ll tie directly to a stock’s cash market volume and free float—the shares available for public trading. SEBI sets this limit as the smaller of two numbers: 15% of the free float or 65 times the average cash volume across exchanges.
This MWPL will refresh every quarter, using the latest rolling data on cash volumes. By linking it to actual delivery volumes in the cash market, SEBI hopes to spot and prevent dodgy trades more easily.
Once a stock hits the ban period—when positions get too high—traders must quickly cut back. SEBI requires a drop in future equivalent open interest (a measure of outstanding contracts) by the end of each day. For example, if your net position stands at +10 or -10 contracts at close on day one, you need to bring it down to zero by the next day’s close.
If overall open interest for a stock creeps past 95% of its MWPL, brokers and traders can only sell or offset to shrink positions—no adding more bets allowed.
Looking ahead, SEBI plans intraday checks on MWPL use for individual stocks starting November 3, 2025. Clearing corporations will run at least four surprise spot-checks during trading hours. If anyone breaks the rules, exchanges can step in with penalties like extra surveillance margins to cool things down.
Finally, from December 6, 2025, F&O trading will get pre-open sessions, just like the cash market. This tweak aims to boost liquidity and make trading smoother for everyone involved.
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