By Nesil Staney
The Securities and Exchange Board of India (SEBI) on Thursday announced a fresh set of guidelines for the derivatives market on Thursday. Touted as the futures and options 2.0 guidelines, these measures are expected to further improve risk management, implement adequate surveillance as well as smoothen settlement of trades in the derivatives markets.
“With increased retail participation, offering of short tenure index options contracts, and heightened trading volumes in index derivatives on expiry day, it is crucial to ensure integrity of securities market ecosystem,” the markets regulator said.
SEBI will not monitor intraday index option positions — a major relief to market makers who said constant monitoring would disturb liquidity. However, it will now track Open Interest (OI) using a new method called FutEq or delta-based OI. It has also increased the position limits for index options.
In addition, it will allow broader limits based on a mix of fixed amounts and a percentage of market Open Interest, depending on the type of investor (like FPIs or mutual funds).
The ‘market wide position limits’ (MWPL) of stocks have been tweaked. The MWPL shall be lower of 15% of free float and 65x Average Daily Delivery Value (ADDV) with a floor limit of 10% of free float, SEBI said. This move is expected to reduce stock ban events in the derivatives market, said brokers.
Stocks will now enter the ban list a day after the MWPL breach to reduce instances of spurious F&O ban periods in single stocks. It gives traders time to adjust. Exchanges will monitor open interest randomly during the day and report breaches fortnightly.
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.
“The new rules aim to reduce speculation in F&O market by limiting position limits & increasing surveillance in phased manner. Changes in MWPS are aimed at better matching derivative exposure with cash market limits,” Anita Gandhi, institution head at Arihant Capital.
Traders may now be allowed to take positions in stocks under the ban period — but only if it helps reduce overall risk in their portfolio.
These measures are not enforcement tools but designed to improve transparency and reduce the chance of manipulation, according to SEBI.
Along with SEBI’s earlier measures, the proposed changes to open interest calculations will help in reducing speculation in F&O markets, reduce market volatility, and drive a healthy participation of retail investors who understand risk vs reward, Harsha M, CEO and founder, Zerodha Streak, said.
SEBI has also revised rules for allowing F&O trading on non-benchmark indices. New rules include minimum 4 stocks in the index, top stock’s weight capped at 20% and top 3 stocks’ combined weight not more than 45%.
Subsequent to December 5, 2025, the end of day excess position in index options on each day shall be checked by exchanges against the holding of securities or reported cash or equivalent on that day. Excess position beyond permissible limits will attract additional surveillance.
The pre-open session will 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. In the last five trading days before expiry, these sessions shall extend to next-month futures contracts.
These rules will be implemented in phases between July and December 6 this year.