SEBI Unveils New Risk Metrics to Rein in F&O Market Speculation

Indian securities regulator SEBI is set to unveil sweeping new risk measures aimed at curbing excessive speculation in the booming futures and options (F&O) market. The overhaul includes recalculating open interest on a "future equivalent" (delta-based) basis, which more accurately relates derivatives exposure to underlying cash market liquidity and tracks actual risk, as opposed to notional values. The Market-Wide Position Limit (MWPL) for stocks will now be the lower of 15% of free float or 65 times the average daily delivery value, a move experts say will curb manipulation and reduce stocks hitting the ban period.

 

For index options, the gross position limit will rise to ₹10,000 crore, while single-stock exposure for foreign investors and mutual funds is capped at 30% of MWPL, and 10% for individuals. SEBI will also require exchanges to conduct four random intraday surveillance checks daily to detect misuse. The reforms, approved by SEBI’s advisory committee, aim to balance trading efficiency with tighter risk controls as retail participation in F&O remains high despite recent interventions.

 

Source: Business Standard