SEBI Enhances Equity Derivatives Risk Controls and Trading Norms

Circular No. SEBI/HO/MRD/TPD-1/P/CIR/2025/79; Dated: 29.05.2025

The Securities and Exchange Board of India (SEBI) has announced a set of new measures aimed at improving trading convenience and strengthening risk monitoring mechanisms in the equity derivatives segment. These changes reflect SEBI’s continued commitment to fostering a more transparent, efficient, and secure market environment.

1. Key Regulatory Enhancements Introduced

1.1 Delta-Based Open Interest (OI) Calculation

SEBI will now mandate a Delta-Based Open Interest (OI) computation model for derivatives contracts.

• This approach aligns position tracking with actual risk exposure, considering the sensitivity of option prices to underlying movements.
• It offers a more precise method to gauge market positions, particularly in complex options strategies.

1.2 Redefined Market-Wide Position Limits (MWPL)

The Market-Wide Position Limits (MWPL) for index futures and index options are being redefined.

• The aim is to ensure that limits are reflective of market dynamics and index composition.
• This helps avoid concentration risks and supports fair participation across investor classes.

1.3 Trading Restrictions During Ban Periods

New trading restrictions will be enforced during ban periods for specific securities:

• These restrictions are designed to prevent excessive speculative activity.
• They safeguard against potential market manipulation and systemic risks arising from breached limits.

1.4 Eligibility Criteria for Derivatives on Non-Benchmark Indices

SEBI has also set eligibility norms for derivatives contracts based on non-benchmark indices.

• These criteria will assess factors such as liquidity, investor participation, and index robustness.
• The goal is to ensure that only indices with sufficient depth and market relevance are permitted for derivative trading.

2. Objective Behind the Measures

These steps are intended to:

• Improve risk assessment and surveillance
• Enhance market integrity and investor protection
• Foster a more efficient derivatives trading framework
• Align with global best practices in derivatives markets

3. Strengthening Regulatory Oversight

By introducing these measures, SEBI continues to evolve India’s capital markets through:

• Data-driven supervision
• Adaptive risk controls
• Transparent regulatory frameworks

These developments are expected to bolster market confidence and support sustainable growth in the equity derivatives segment.

Click Here To Read The Full Circular