SEBI Consultation Paper on Derivatives: Index and Stock Limits
Why in the news
BSE Ltd’s shares fell almost 20% after SEBI’s consultation paper on market rules, though analysts felt the proposals could prove milder than feared.
Part A: index derivatives
- Open interest (OI) to shift to a delta-based future equivalent measure.
- Limit of ₹500 crore net per entity; 11% of November positions exceeded it.
- Aim: curb systemic risk if OI goes beyond ₹10,000 crore, which is rare.
Part B: non-benchmark indices
Covers Nifty Bank and BSE Bankex; Nifty 50 and Sensex are excluded.
| Criterion | Proposed | Today |
|---|---|---|
| Minimum constituents | 14 | 12 (Nifty Bank) |
| Top stock weight | 20% | 33% (HDFC Bank) |
| Top three stocks | 45% | – |
Single stock derivatives
| Limit | Old | New |
|---|---|---|
| Free float market cap | 20% | 15% |
| Average daily delivery value | 30x | 60x |
Significance
- Exchanges can easily rebalance indices, so discontinuation is unlikely.
- Rules target manipulation and systemic risk rather than trading itself.
Exam angle
- Regulator: SEBI; terms: open interest, free float.