Sebi to perform new F&O risks in phases

Copyright © HT Digital Streams Limit all rights reserved. Neha Joshi 4 min Read May 29, 2025, 10:07 pm ist Sebi’s new rules aim to improve riskatistics for better monitoring and disclosures in futures and options. (Reuters) Summary limits on index options and futures to be enforced in phases; The gross exposure base linked to £ 10,000, the market regulator will implement its latest measures to monitor risks in equity derivatives, including position restrictions related to the price of the underlying asset, in a distributed way from 1 July. The new rules of the Securities and Exchange Board of India (Sebi) are aimed at improving riskatistics for better monitoring and disclosures in futures and options, to reduce cases of false F&O (futures and options) in single shares and better oversee the possibility of concentration or manipulation risk. The approved regulatory framework announced on Thursday was first proposed in a consulting document in February. It contains feedback from market participants and is completed after discussions with Sebi’s secondary market advisory committee. Also read: Sebi’s co-investment plan wins Fund danger; Attorneys warn about taxes, legal cracks delta-adjusted OI a key change is the shift to a more risk-sensitive metric-Delta-adapted open interest-for the monitoring of positions on futures and options. Clearing Corporation has already adopted this metric. This is called the future equivalent open interest (futeq oi), and it refers to the net exposure of a participant in the derivative segment to adjustment for the delta – a measure of how much an option or the future’s price moves in relation to the underlying asset. For example, a long -term position has a delta of +1, while options range from -1 to +1, depending on whether they are wells or calls, and whether it is bought or sold. Sebi will now calculate all exposure in delta-adjusted terms to determine the actual direction risk. New position restrictions from July 1 SEBI will impose a new limit structure for index options. Traders will be allowed a net futeq oi of £ 1,500 crore and a gross limit of £ 10,000 crore (both long and short positions), showing them sufficient cash or security support. Big investors will have until December 5 to build systems to detect the exposure to Delta intern. Daily warnings are issued for offenses, and by December 6, the real -time compliance will be mandatory. Also read: Sebi reopens the investigation into the Insider trade against Top Indusind Bank managers’ limits for index futures will also kick in on July 1. Large entities such as mutual funds, foreign portfolio investors (FPI) (Category I), own trading firms and clients can have up to 15% of the market-wide index futures open interest or £ 500, which is also higher. Category II FPIs will have lower thresholds. Market-wide position restrictions (MWPL) for single stocks-which are constantly defined as 20% of the free float will be reviewed from October 1. This refers to the total number of stock options and futures you can trade on the exchanges. The new shell is the lower of 15% of the free raft or 65x the average daily delivery value (ADDV), with a floor of 10%. This approach links derivative limits to the actual liquidity in the cash market. Sebi is of the opinion that tying MWPL to delivery volumes would better reflect underlying stock depth and artificial price movements driven by F&O positions. Sebi will also decrease the creation of position during prohibition periods – when an open interest in a stock crosses 95% of its MWPL. As of October 1, any new trade in such a clip of delta adjusted exposure should reduce. Also read: Sebi bars Varyaa Creations from Markets, stop the fresh ipo mandates of inventure. From November 3, stock exchanges MWPL use must report intraday, at least four random times per session, monitor and significant offenses to SEBI. From December 6, a pre-open-session-a discovery phase similar to that in cash markets-also applies to the current month index and single-share futures, especially in the roller week before expiration. Single stocks F&O-Pet From October 1, new caps at entity level for single-stock F&O exposure will apply. It ranges from 10% of MWPL for customers, NRIs and small FPIs, to 30% for mutual funds, own books and large institutional FPIs. These measures are in addition to the measures that Sebi implemented in October last year. The regulator increased the lot size of index options from 25 to 75 shares and limited each stock exchange to only one index decay per week, after a detailed SEBI study found that retailers lost £ 1.89 billion between FY22 and FY24, largely due to the speculation day. In contrast, high-frequency traders have benefited, causing the regulatory concerns about the uneven playing field. After this, Sebi’s consultation document in February 2025 proposed stricter limits on index, including a controversial £ 1,500 crore limit. However, this has attracted strong opposition to the market participants who argued that it would harm liquidity and hinder its hedging. In response to the feedback, Sebi not only dropped the intra-day retention, but also tripled the net limit and increased the gross limit more than sixfold to make more flexibility possible while retaining discipline. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More topics #sebi #trade read next story