SEBI Derivatives Proposal: Tighter Stock and Index F&O Norms
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
| Condition | Limit |
|---|---|
| Constituents for new contracts | At least 14 |
| Top three stocks combined | At most 45% |
| Largest single stock | At most 20% |
Significance
- Would limit speculation and manipulation, and tie derivatives to fundamentals.
Exam angle
- Comments open till 17 March 2025; term: MWPL.