SEBI tightens control on F&O trades: Introduces stricter position limits and monitoring from Oct 1

To curb speculation and maintain market stability, the Securities and Exchange Board of India (SEBI) has announced new measures to regulate derivatives trading, effective from October 1. These measures aim to reduce excessive speculation and align risk with underlying cash market activity.

Market-Wide Position Limit (MWPL):

The maximum number of bets allowed will be linked to cash volume and free float of the scrip. MWPL will be set at the lower of 15 per cent of free float or 65 times cash volume across exchanges.

According to the market regulator, MWPL will be updated quarterly based on rolling cash volume data to reduce manipulation risks.

SEBI expects that tying the MWPL to cash market delivery volume may also reduce the risk of manipulation.

Ban period trading restrictions:

Once the market-wide open interest for a share exceeds 95 per cent of the MWPL, traders can only decrease their positions through offsetting trades.

"Subsequent to its entry in the ban period, should result in a reduction of Future Equivalent (FutEq) open interest (OI) on an end-of-day basis. For instance, if the delta position is (+10) or say (-10) at the end of day 1, then it could be reduced to 0 by the end of day 2," SEBI said.

Enhanced monitoring:

1) Intraday monitoring: SEBI will introduce intraday monitoring of MWPL utilisation for single stocks from November 3, 2025.

2) Random checks: Clearing corporations will conduct checks at least four random times during the intraday trading session.

3) Actions for breaches: Exchanges will take actions, including imposing additional surveillance margins, if breaches occur.

Pre-open sessions for F&O:

From December 6, 2025, pre-open sessions will be extended to Futures and Options (F&O) to enhance trading convenience and liquidity management, similar to the cash market.

SEBI:

SEBI (Securities and Exchange Board of India) is the regulatory body for the Indian securities market, established in 1992 by the SEBI Act to protect investors, regulate the market, and promote its development.

It acts as a watchdog for the stock market, ensuring fair practices by all participants, including companies, brokers, and investors, while also updating regulations and technology to foster growth and stability.