SEBI New Rules: SEBI has once again shaken up the stock market with new proposed rules for Futures & Options (F&O) trading, aiming to reduce risks for traders and investors. This move comes at a time when concerns are rising about high volatility in the F&O market affecting the overall stock market.
SEBI’s latest proposal focuses on stricter position limits and changes in market-wide risk monitoring. Earlier in October 2023, SEBI had already made F&O trading expensive for retail investors to ensure their protection. But now, with the market facing fluctuations since reaching record highs in September 2024, SEBI has stepped in again with fresh measures to bring stability.
Major Changes in F&O Trading Rules
One of the key changes proposed is in the calculation of Open Interest. Earlier, it was based on the total value of shares, known as notional value. Now, SEBI wants it to be calculated based on the Future Equivalent method, making risk analysis more accurate and preventing unnecessary restrictions on stocks.
Another major change is in Market-Wide Position Limits (MWPL), which decide how much investment can be made in a particular stock. Currently, MWPL is 20% of the stock’s market capitalization, but SEBI plans to reduce it to 15% or 60 times the average daily delivery value, whichever is lower. This move is expected to reduce market manipulation and sudden fluctuations.
New Trading Restrictions and Monitoring System
SEBI has also introduced fresh rules regarding trading restrictions during the ban period. If a stock crosses 95% of its MWPL, derivative trading in it gets banned. Under the new rules, investors can only make trades that reduce their Open Interest, helping maintain liquidity and protecting traders from heavy losses.
Another crucial proposal is the introduction of four-time intraday risk monitoring instead of the current once-a-day monitoring. This will help detect any irregularities quickly, ensuring better market stability.
Apart from this, SEBI has also proposed changes in the exposure limits for mutual funds and Alternative Investment Funds (AIFs), where all options will now be measured using the Future Equivalent Method. This will improve risk management and enhance transparency for investors.
Overall, SEBI’s new rules aim to make the stock market more secure, stable, and transparent. These proposals are currently open for public feedback until March 17, 2025. If implemented, they could bring significant changes to F&O trading in India.
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