SEBI's big move: New rules for F&O trading to come into effect soon, aims to boost market stability

Mumbai (The Uttam Hindu): The Securities and Exchange Board of India (SEBI) has announced stricter regulations for F&O (Futures and Options) trading, effective October 1st. Under the new rules, position limits for derivatives trading have been tightened. Additionally, regulations for positions in banned stocks have been revised and monitoring has been enhanced.

The new rules aim to reduce excessive speculation and align risk with cash market activity. The market regulator stated that the market-wide position limit (MWPL) and maximum bet limits will be linked to the cash volume and free float of shares and set at 15 percent of the free float or 65 times the cash volume on exchanges, whichever is lower. SEBI stated that the market-wide position limit (MWPL) will be updated quarterly based on rolling cash volume data. SEBI expects that linking the MWPL to the cash market will reduce speculative risk in the market. SEBI stated, “Following the entry into force of the ban, the futures equivalent open interest at the end of the day should decrease. For example, if the delta position at the end of the first day is (+10) or (-10), it may decrease to 0 by the end of the second day.”

When the market open interest for a stock exceeds 95 percent of the MWPL for that stock, brokers and traders can only trade to reduce their positions through offsetting positions. The market regulator will also begin intraday monitoring of MWPL for individual stocks from November 3, 2025. Clearing corporations will monitor at least four times during an intraday trading session. If violations occur, exchanges will take action, including imposing additional monitoring margins. The market regulator stated that from December 6, 2025, pre-open sessions will be extended to F&O, similar to the cash market, to improve trading convenience and liquidity management.