On October 16, 2024, the Securities and Exchange Board of India (SEBI) increased the position limits for index futures and options applicable to trading members (TMs). Under the revised rules, the position limit for both client and proprietary trades has been raised to Rs 7,500 crore or 15% of the total open interest in the market, whichever is higher. Previously, the limit for trading members, covering both proprietary and client trades, was Rs 500 crore or 15% of the total open interest. The new position limits are effective immediately, and monitoring based on the previous day's OI will start from April 1, 2025.
SEBI has clarified that position limits are to be applied separately for index futures and index options. It noted that open interest from both participants and the market is dynamic and fluctuates throughout the day. Therefore, positions will now be monitored based on the total open interest of the market at the close of trading on the previous day.
In line with current practices in the currency derivatives segment, the positions of market participants in the equity derivatives segment (including both index and individual stocks) will also be monitored based on the total open interest of the market at the end of the previous day's trading session, as stated in SEBI's release.
Additionally, if the market's open interest decreases on the following day, participants may find themselves exceeding their limits even without initiating new positions. In such instances of passive breaches by market participants, no penalties will be imposed, and they will not be required to unwind their existing positions.
What is Position Limit?
A position limit is the maximum number of futures or options contracts a trader or firm can hold in the market. It’s set by regulator i.e SEBI, to prevent anyone from controlling too much of the market, which could affect prices unfairly.
For example, if you're trading index futures, the position limit restricts how many of those contracts you can buy or sell at one time. It helps keep the market balanced and reduces the risk of market manipulation.
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