With the intention to additional improve buying and selling comfort and strengthen danger monitoring within the fairness derivatives section, the Securities and Change Board of India (SEBI) on Thursday introduced a slew of measures, together with formulation of open curiosity and place creation of single shares throughout the ban interval.
The brand new measures come months after Sebi had introduced a set of six measures within the futures & choices (F&O) section, which included recalibration of contract measurement for fairness derivatives, rationalization of weekly index derivatives merchandise and enhance in tail danger protection on the day of choices expiry.
These measures had been introduced due an exponential surge in buying and selling volumes within the section, with the vast majority of traders incurring losses. Nevertheless, regardless of tightening of rules within the fairness derivatives section, the Sebi discovered that the buying and selling exercise of people continues to stay excessive.
A latest evaluation, performed by Sebi for the interval December 2024 to March 2025, confirmed that the variety of people buying and selling in fairness derivatives was down 12 per cent year-on-year (YoY) however up 77 per cent from two yr in the past.
“Open Curiosity (OI) of the individuals in derivatives shall be measured at a portfolio degree by computing the web Delta adjusted open positions throughout futures and choices for an underlying at a given time limit,” Sebi mentioned in a round.
Delta denotes sensitivity of value motion of by-product place with respect to that of the underlying. For choices, delta will vary between 0 and +1 instances notional for lengthy calls and between 0 and –1 instances notional for lengthy places. In case of brief choices place, efficient delta for brief calls is adverse and that of brief put is constructive, Sebi mentioned.
To calibrate Market Extensive Place Restrict (MWPL) to the brand new formulation of OI measurement and likewise hyperlink it to money market exercise, Sebi mentioned that MWPL shall be decrease of 15 per cent of free float and 65 instances Common Every day Supply Worth (ADDV) throughout clearing companies with a flooring restrict of 10 per cent of free float.
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This metric shall be recalculated each three months based mostly on the rolling ADDV for the previous three month interval.
As soon as the market extensive open curiosity for any scrip exceeds 95 per cent of the MWPL for the scrip, the members/shoppers shall commerce solely to lower their positions by means of offsetting positions, which is known as the ban interval.
The markets regulator mentioned that any buying and selling achieved by entities within the derivatives contracts of a scrip, subsequent to its entry within the ban interval, ought to lead to discount of Future Equal Open Curiosity (FutEq OI) on an finish of day foundation.
To safeguard market integrity and restrict settlement danger from intraday spikes in FutEq OI, Sebi mentioned that inventory exchanges ought to carry out intraday monitoring of MWPL utilization at the least 4 random instances throughout the buying and selling session. That is to take applicable actions as soon as OI utilization breaches sure limits and to report cases of great utilization of MWPL / breach of MWPL to Sebi within the fortnightly surveillance assembly.
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Additional, to strike a steadiness between market stability or concern of manipulation of underlying constituents related to a big measurement index place and the flexibility to take significant publicity by individuals, Sebi stipulated limits for index choices at PAN degree.
“Web finish of day FutEq OI restrict for choices to be Rs 1,500 crore and gross FutEq OI to be Rs 10,000 crore (i.e. neither gross lengthy FutEq OI nor gross brief FutEq OI shall exceed Rs 10,000 crore),” the regulator mentioned.
Inventory exchanges ought to put together a joint SOP (normal working process), in session with Sebi, to strictly monitor intraday positions and buying and selling actions of main individuals from the angle of market integrity / surveillance considerations and take applicable measures, it mentioned.
The regulator mentioned that the pre-open session shall be prolonged to current-month futures contracts on each single shares and indices, mirroring the modalities of the money market’s pre-open and post-closing classes.
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To supply ample time to market individuals for shifting to FutEq OI, Sebi has given inventory exchanges and clearing companies a timeline until December 6, 2025, for implementation of all of the proposals.