The Securities and Exchange Board of India (SEBI) has made an important announcement regarding position limits for trading members in index futures and options contracts. The new rule allows trading members to hold positions up to 15% of the total open interest (OI) in the market or above ₹7,500 crore, whichever is higher. This change is significant for market participants and aims to enhance liquidity and trading opportunities.
Previously, the position limit was set at ₹500 crore or 15% of the total OI. Now, the cumulative limits will apply to both client and proprietary trades, which means all trades done by clients and the trading members themselves will be counted together. SEBI has clarified that these limits will be applicable separately for index futures and index options, following the current practices in the market.
This new regulation is expected to benefit trading members by providing them with more flexibility in managing their positions in the derivatives market. With higher limits, traders can potentially increase their investment in index futures and options, allowing them to take larger positions in these contracts.
SEBI stated in its circular: “The position limits for trading members, cumulatively for client and proprietary trades, in index futures and options contracts may be set at higher of ₹7,500 crore or 15% of the total OI in the market.” This means that if the total open interest in the market is less than ₹7,500 crore, the limit will still be ₹7,500 crore.
To ensure the integrity of the market, SEBI will monitor the equity derivatives segment, which includes both index and stock options. Monitoring will be based on the total open interest at the end of the previous trading day. It’s important to understand that the open interest can change throughout the trading day, reflecting market dynamics.
Effective Date of New Rules
The new position limits will come into effect immediately, providing trading members with immediate access to the higher limits. However, the monitoring rules for these position limits will be enforced starting April 1, 2025. This timeline allows market participants to adapt to the new regulations effectively.
SEBI’s decision to raise position limits for index futures and options contracts reflects its commitment to improving the market infrastructure and supporting liquidity. By allowing trading members to hold larger positions, SEBI is fostering a more dynamic trading environment, which can lead to increased participation from various market players.
This change is a positive step for traders looking to engage more actively in the derivatives market and may enhance overall market efficiency. As these new rules take effect, market participants are encouraged to stay informed about the implications and adjust their trading strategies accordingly.
