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Informist, Thursday, Dec. 4, 2025

 

--SEBI issues consultation paper on position limits for equity F&O traders

 

MUMBAI – The Securities and Exchange Board of India Thursday issued a consultation paper to review the position limits for equity derivatives traders. The regulator has sought comments about the calculation and alignment of existing position limits of trading members in terms of futures equivalent value. Public comments should be submitted to the regulator by Dec. 26, SEBI said.

 

A futures equivalent value is a delta-based measure which helps to determine the risk of a position in the options chain. Derivatives traders use this measure to balance the risk of their options trades against the underlying futures contract. A delta measures the expected change in the price of an option for a one-unit change in the price of the underlying asset. 

 

With this new proposal, SEBI aims to enable trading members to compute their own futures-equivalent positions so that they can take suitable action during market hours if their utilisation approaches or crosses the limits proposed for them. For this purpose, the regulator has proposed a new position limit for index options. This limit should be 15% of market-wide futures-equivalent open interest instead of the current limit of 15% of notional open interest, as per the draft circular in the consultation paper. However, the regulator did not propose any change in position limits for index futures, that is, the current limit of INR 75 billion or 15% of open interest, whichever is higher for trading members.

 

For index derivatives products with less open interest, the absolute limit of INR 75 billion could lead to a situation where a single trading member captures a significant proportion of the open interest. "Hence, a slab-based absolute limit structure may be required to effectively account for the diverse levels of market activity and liquidity," SEBI said in the consultation paper. 

 

During a trading day, clearing corporations will provide the delta of options contracts along with the file for standard portfolio analysis of risk. This will enable trading members to compute the futures equivalent open positions for options contracts of its clients, as per the draft circular.  End

 

Reported by Anjana Therese Antony

Edited by Ashish Shirke

 

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