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SEBI Derivatives Proposal: Tighter Stock and Index F&O Norms

26 February 20251 min read
BANKING & FINANCESEBI DerivativesProposal: TighterStock and IndexF&O Norms26 February 2025safalsetu.com

Why in the news

SEBI proposed lower stock derivative position limits and tighter index derivative rules to curb market risk, following October 2024 steps. F&O volatility was spilling into a market that had slipped from September’s record highs.

Key facts

  • Single-stock market-wide position limits (MWPL) would follow cash-market depth.
  • Limit = the lower of 15% of free-float market capitalisation or 60 times average daily delivery value.
  • A pre-open session for current-month futures would improve price discovery and soften opening volatility.

Proposed index derivative conditions

ConditionLimit
Constituents for new contractsAt least 14
Top three stocks combinedAt most 45%
Largest single stockAt most 20%

Significance

  • Would limit speculation and manipulation, and tie derivatives to fundamentals.

Exam angle

  • Comments open till 17 March 2025; term: MWPL.

Test yourself

1. What is the minimum number of constituents SEBI proposed for new index derivative contracts?

New contracts need an index with at least 14 constituents.

2. Under SEBI's proposal, the top three stocks in an index may together make up at most what share?

The top three stocks are capped at 45%; the top stock at 20%.

3. SEBI sought market participants' feedback on its derivatives proposals until which date?

Comments were invited until 17 March 2025.

This topic is part of Daily Current Affairs 26 February 2025 (13 topics).

All topics of the dayDay quizFebruary 2025

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