On Tuesday, September 24, 2024, the National Stock Exchange (NSE) announced that trading in futures and options (F&O) contracts for 12 specific stocks is banned for the day. The ban applies only to F&O trading, meaning that investors can still buy and sell these stocks in the regular cash market.
The following 12 stocks have been placed on the F&O ban list for September 24:
- Aarti Industries
- Aditya Birla Fashion and Retail
- Biocon
- Chambal Fertilisers and Chemicals
- GNFC (Gujarat Narmada Valley Fertilizers & Chemicals)
- Granules India
- Vodafone Idea
- LIC Housing Finance
- National Aluminium Company Limited (NALCO)
- Oracle Financial Services Software
- Punjab National Bank (PNB)
- Steel Authority of India Limited (SAIL)
The F&O ban is triggered when the combined open interest positions (the number of active F&O contracts) in these stocks exceed 95% of the market-wide position limit (MWPL). MWPL is a limit set by the NSE to manage the total amount of futures and options contracts that can be open at any given time for a specific stock.
When a stock’s F&O positions cross this 95% threshold, the stock is placed in the F&O ban period. This is done to avoid excessive speculation and to keep the market stable. The ban is a temporary measure to control high volatility and maintain fair trading practices.
The NSE imposes the F&O ban to limit excessive speculation and maintain market stability. Stocks with high trading volume or sudden large price movements can create instability in the market. By restricting F&O trading, the NSE aims to prevent large-scale market risks that could arise from sharp fluctuations in stock prices or high levels of speculative activity.
For investors who own any of the 12 stocks on the F&O ban list, there is no need to worry about the ban itself. You can still buy and sell these stocks in the regular cash market. However, if you are involved in F&O trading, you should focus on reducing or closing your existing contracts rather than opening new ones.
Since the ban only applies to F&O trading for a limited time, it’s a temporary measure. The NSE reviews the F&O ban list daily, and stocks can be removed from the list once their open interest falls below the 95% threshold of the MWPL.
The F&O ban list is an essential tool used by the NSE to ensure the stock market operates smoothly and avoids excessive risk. Although it may affect short-term trading in futures and options, it helps maintain stability in the market. Investors can continue to trade these 12 stocks in the cash market, but those dealing in F&O should pay attention to the ban and manage their positions carefully.
This temporary restriction is part of the market’s safeguards to keep the trading environment fair and orderly.
