What New Rules Did SEBI Introduce for Equity F&O Segment?
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Synopsis
The SEBI has introduced groundbreaking regulations for the equity F&O segment, aiming to enhance transparency and stability while curbing excessive speculation. Discover how these changes can impact traders and the market as a whole.
Key Takeaways
- SEBI introduces new rules for equity F&O segment.
- Focus on enhancing transparency and stability.
- Open interest monitoring now occurs throughout the day.
- Market-wide position limits linked to cash market volume.
- Increased position limits for Index Futures and Options.
Mumbai, May 29 (NationPress) The Securities and Exchange Board of India (SEBI) unveiled a fresh set of regulations for the equity Futures and Options (F&O) sector on Thursday. These reforms are designed to enhance transparency, mitigate excessive speculation, and foster greater market stability.
A significant modification involves a revised approach to assessing open interest (OI) in the equity F&O sector. Open interest signifies the total number of active contracts in futures or options.
SEBI will now actively observe open interest levels throughout the day, particularly for individual stock futures and options, rather than only at the day's end.
The capital market regulator has also made the decision to associate the market-wide position limit (MWPL) with the cash market volume and the free float of the stock.
MWPL denotes the maximum number of contracts permissible in F&O trading for a specific stock, aiming to curb excessive speculation in stocks with limited liquidity.
In another pivotal action, SEBI has raised the position limits for trading in Index Futures and Index Options. This adjustment seeks to balance granting market participants the ability to take substantial positions in large indices while minimizing manipulation risks.
For Index Options, the net end-of-day position limit for futures-equivalent open interest (FutEq OI) will be set at Rs 1,500 crore. In terms of gross positions, neither the long nor short side should surpass Rs 10,000 crore.
Position limits for Index Futures will differ based on participant categories. For instance, 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 percent 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 greater of 10 percent of the open interest or Rs 500 crore. Brokers, including their proprietary and client accounts combined, will have an overall cap of 15 percent of open interest or Rs 7,500 crore, whichever is lower.
SEBI clarified that these limits are in addition to any holdings participants may have in the cash market or actual stock holdings. These new regulations are anticipated to render the F&O segment more transparent and efficient while keeping excessive risk in check.
Point of View
I view SEBI's latest rules as a proactive step towards enhancing the integrity of the equity F&O segment. These measures not only aim to curb speculation but also promote a more transparent trading environment that can benefit both institutional and retail investors. It's crucial for stakeholders to adapt to these changes to ensure a robust financial ecosystem.
NationPress
08/06/2025
Frequently Asked Questions
What is the purpose of SEBI's new rules for the F&O segment?
The new rules are designed to enhance transparency, control excessive speculation, and promote market stability within the equity F&O segment.
How will open interest be monitored under the new rules?
SEBI will now monitor open interest levels throughout the trading day, particularly for single stock futures and options, rather than only at the end of the day.
What is the significance of the market-wide position limit (MWPL)?
MWPL is the maximum number of contracts that can be open in F&O trading for a specific stock, aimed at preventing excessive speculation in stocks with limited liquidity.
What changes have been made regarding position limits for Index Futures and Options?
SEBI has increased position limits for trading in Index Futures and Options to allow meaningful positions while reducing manipulation risks.
How do these new rules affect traders?
These rules aim to create a more transparent and efficient F&O segment, helping traders manage risks more effectively.
