SEBI Introduces New Rules For Equity F&O Segment To Boost Transparency, Stability

New Delhi: The Securities and Exchange Board of India (SEBI) on Thursday announced a new set of rules for the equity Futures and Options (F&O) segment. These changes aim to improve transparency, control excessive speculation, and bring more stability to the market.

One of the major changes introduced by the SEBI is a new method for measuring open interest (OI) in the equity F&O segment. Open interest refers to the total number of outstanding contracts in futures or options.

The SEBI said it will now closely monitor the open interest levels during the day, especially for single stock futures and options, instead of waiting until the end of the day. The capital market regulator has also decided to link the market-wide position limit (MWPL) to the cash market volume and the free float of the stock.

MWPL is the maximum number of contracts that can be open in F&O trading for a particular stock. This move is aimed at preventing excessive speculation in stocks with limited liquidity.

In another key measure, the SEBI has increased the position limits for trading in Index Futures and Index Options, saying that it wants to strike a balance between allowing market participants to take meaningful positions in large indices and avoiding manipulation risks.

For Index Options, the net end-of-day position limit for futures-equivalent open interest (FutEq OI) will be Rs 1,500 crore. In terms of gross positions, neither the long nor the short side should exceed Rs 10,000 crore.

When it comes to Index Futures, position limits will vary by category of participants. For example, for Foreign Portfolio Investors (FPIs) in Category I, mutual funds, and brokers (including proprietary and client trades), the limit will be the higher of either 15 per cent of the total futures open interest or Rs 500 crore.

For FPIs in Category II — excluding individuals, family offices, and corporates — the limit will be the higher of 10 per cent of the open interest or Rs 500 crore. Brokers, including their proprietary and client accounts combined, will have an overall cap of 15 per cent of open interest or Rs 7,500 crore, whichever is lower.

The SEBI clarified that these limits are in addition to any holdings the participants have in the cash market or actual stock holdings. The new rules are expected to make the F&O segment more transparent and efficient, while also keeping excessive risk in check.