SEBI governs the stock market and ensures that the interest of investors is protected. It protects them from exploitation and fraud by establishing certain rules and regulations. However, they keep on updating the rules for offering better service.
Recently, SEBI introduced new rules and regulations for F&O trading, which are beneficial for traders who trade in the true spirit. These rules narrow the chance of manipulation and illegitimate trade practices. This article will help you understand it in detail.
1. Change in Calculation of OI
The change in the way Open Interest (OI) is calculated is among the biggest ones. Up until now, OI was determined notional, ignoring the market’s real risk exposure. With the change introduced, Future Equivalent (FutEq) or delta-based OI, which takes into account the price sensitivity of contracts, is now required by SEBI.
2. Updated position limits
SEBI has increased the cap on index derivatives in terms of position limits. With a gross limit of ₹10,000 crore per PAN, the net end-of-day limit for index options is currently ₹1,500 crore. These adjustments maintain stricter controls on excessive speculation while giving institutional investors more leeway.
| Instrument | Type | Limit (PAN-level) | Effective Date |
| Index Options | Net EOD (FutEq) | ₹1,500 crore | July 1, 2025 |
| Gross Limit | ₹10,000 crore | July 1, 2025 | |
| Index Futures | Institutional | Higher of 15% OI or ₹500 crore | July 1, 2025 |
| Category II FPIs | Higher of 10% OI or ₹500 crore | July 1, 2025 |
3. Increased Market-Wide Position Limits (MWPL) Surveillance
In order to reflect real-time liquidity and lessen manipulation, SEBI redesigned the Market Wide Position Limits structure. MWPL will be considered either 65 times the average daily cash volume or 15% of the free float, whichever is lower.
Furthermore, intraday MWPL monitoring for individual stocks will be implemented by exchanges and clearing corporations at four random intervals per day. Any breach could lead to more restrictions or margins for surveillance.
4. Improving Market Structure
The pre-open session for F&O contracts is starting for the first time. In order to facilitate rollover trades, the pre-open window will begin to apply to current-month futures on December 6, 2025, and will be extended to next-month contracts in the five days prior to expiry.
Better index construction will also be ensured by new eligibility requirements for non-benchmark indices. Now, any index provided in the F&O segment needs to have:
- 14 components or more.
- The maximum weight for a stock in the index is 20%.
- The sum of the top three is capped at 45%.
5. Other Notable Reforms
- Position Creation During Ban Period: Rather than totally stopping the trade, traders may lower their current positions (for example, a delta of +10 to 0) during the ban to help control risk.
- Limits on Single Stock Positions: From October 1, 2025, individuals are now permitted to own up to:
| MWPL | 10% |
| Proprietary brokers | 20% |
| FPIs and brokers | 30%(Combined) |
- Mutual funds and alternative investment funds are now required to calculate their long and short exposures using FutEq OI, which provides a more accurate representation of risk. To direct implementation, a different circular will be released.
Effect on Investors
The goal of SEBI’s initiative is to make the F&O ecosystem more resilient, transparent, and investor-friendly. The increased position limits provide more operational flexibility for institutions and experienced traders.
However, the focus on margin discipline, real-time monitoring, and delta-based risk serves as a safeguard for individual investors.
| Stakeholder | Key Impact |
| Retail Traders | Better risk transparency, tighter position limits |
| Institutional Players | More flexibility, improved limits |
| Brokers | Increased compliance and monitoring duties |
| Exchanges | Greater surveillance and SOP development |
Bottomline
The conclusion can be drawn that SEBI is making changes in rules to facilitate trading for investors, especially in F&O. Pre-open sessions introduced will help in mirroring the structure of the cash market. It will impact different stakeholders in various ways, like exchanges will have to do better surveillance, institutional players will have more flexibility, etc.
All these reforms are for levelling up the trade practices and reducing the risk of manipulation or unfair trade practices.
