Mint Explainer: How Sebi's new proposals aim to curb risks in the derivatives market
Subscribe to enjoy similar stories. The Securities and Exchange Board of India (Sebi) has proposed revising the ₹500 crore exposure limit for index futures and options (F&O), along with other measures to strengthen risk assessment in the derivatives market.
Outlined in a consultation paper released on 24 February, these changes aim to enhance market efficiency and risk monitoring. One of the key proposals is altering the method of calculating open interest (OI), which represents outstanding buy-sell positions in the derivatives market.
Read this | Specialized investment funds: All you need to know about Sebi's new mutual fund category Sebi also plans to link the market-wide position limit (MWPL)—which caps the total open contracts in single-stock futures and options—to the average daily delivery volumes of the underlying stocks, replacing the current notional volume-based calculation. The consultation paper invites public feedback until 17 March on additional proposals, including the introduction of pre-open and post-closing sessions for derivatives trading, revisions to position limits for individual entities in single-stock F&O, and new eligibility criteria for derivatives on non-benchmark indices to improve trading efficiency.
Mint examines three key proposals and their potential impact on investors. In March 2020, Sebi had imposed restrictions on short and long positions in index futures and options, capping net index positions at ₹500 crore.
Under this framework, short positions in notional value could not exceed the participant’s holdings of the underlying stock, while long positions were limited by the participant’s cash or cash-like instruments. The regulator now proposes revising these limits to reflect market
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