SEBI raises position limits for trading members in index F&O

Position limits in index F&O: The Securities and Exchange Board of India ( SEBI ) has increased the position limits for trading members (TMs), including client and proprietary trades, in index futures and options contracts to Rs 7,500 crore or 15 per cent of the total open interest (OI) in the market, whichever is higher. Previously, the limit stood at Rs 500 crore or 15 per cent of the total OI.

This update was announced through a SEBI circular on 15 October. The position limits will be calculated based on the notional value of contracts and will apply separately to index futures and index options.

The circular explained, "The overall position limit at the Trading Member (TM) level (proprietary + client) is now set at the higher of INR 7,500 crore or 15 per cent of the total Open Interest (OI) in the market." This limit applies to all open positions in futures and options contracts on a specific underlying index.

SEBI stated that the increase in position limits follows feedback from market participants and discussions with the Secondary Market Advisory Committee (SMAC). The revised limits take immediate effect, and SEBI will implement changes in the mechanism for monitoring these limits starting from 1 April 2025.

In line with current practices in the currency derivatives segment, the new system will monitor positions in equity derivatives (both index and stocks) based on the total open interest in the market at the end of the previous day’s trading session. If the market’s OI decreases compared to the previous day, a participant's unchanged position may exceed the new limits, but no penalties or forced position unwinding will be imposed in such cases of "passive breaches."

These updates are part of SEBI ’s ongoing efforts to ensure smoother market functioning while responding to participant feedback.