Sebi Hikes Position Limit In Futures & Options: Learn More

Securities and Exchanges Board of India on October 16, 2024, hiked the position limit in index futures and options, applicable to trading members (TM). Now the position limit for both client and proprietary trades can be up to Rs 7,500 crore or 15 per cent of total open interest in the market, whichever is higher. Earlier the overall position limit at the trading member level (proprietary and client) was Rs 500 crore or 15 per cent of the total Open Interest in the market.

Position Limit

In derivatives trading, a position limit means the maximum number of derivative contracts that trading members, such as brokerage houses, can hold, combining their own trades (proprietary) and those made on behalf of clients. This cap prevents any single trader from holding too large a position. The enhanced limits set by SEBI will allow traders to take more trades and enhance the manoeuvrability of trades.

Sebi clarified that the position limits are separately applicable for index futures and index options. It noted that open interests from both the participants and the market is dynamic and changing throughout the day, so the position will now be monitored based on the total open interest of the market at the end of the previous day's trade."

"In conformity with the extant practice in the currency derivatives segment, positions of market participants in the equity derivatives segment (index and stocks) shall also be monitored based on total open interest of the market at the end of the previous day’s trade," Sebi release said.

Amidst monitoring, if the market open interest drops the next day, participants may exceed their limits even if they have not taken new positions. Such cases of passive breaches by market participants would not be penalised nor would they be required to unwind their positions.

The new position limits are effective immediately, and monitoring based on the previous day's OI will start from April 1, 2025.