SEBI’s New F&O Rules: India’s equity derivatives market just got a regulatory makeover. SEBI’s New F&O Rules overhaul position limits, risk monitoring, and contract eligibility. With enhanced index options limits, intra-day flexibility, and a more realistic way of tracking open interest (OI), the move seeks to balance market development with systemic stability.
Let’s break down what this means for Indian traders and why it’s a game-changer for equity F&O participants.
SEBI’s New F&O Rules: Enhanced Index Limits and Risk Monitoring Explained
SEBI’s updated circular, released on May 30, 2025, makes two major shifts:
1. A jump in Index Options gross limits from ₹1,500 crore to ₹10,000 crore per PAN;
2. A new delta-based Open Interest (OI) methodology that better reflects actual market risk.
Earlier, notional OI counted every contract without weighing risk. With Futures Equivalent OI (FutEq OI) or delta-based OI, traders now get a more accurate picture. For instance, an option with a 0.5 delta now counts as half a future—offering more nuanced control and fairer ban period tracking.
Exchanges have already started publishing OI in this new format. This could reduce artificial triggers into ban periods and curb manipulation.
SEBI’s New F&O Rules: Market-Wide Limits Now Tied to Free Float and Liquidity
Market Wide Position Limits (MWPL)—a key cap to curb speculative bubbles—will now be dynamically linked to:
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15% of free float, or
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65x daily cash volume,
whichever is lower.
This formula adds depth. Stocks with low liquidity or small free floats will now have tighter limits, preventing undue build-up of risky bets. It’s a forward-thinking shift, taking effect from October 1, 2025.
Also, clearing corporations will now track OI utilization intra-day—at least four random times daily. If breaches occur, exchanges will step in with additional surveillance margins or trigger entity-level alerts.
Also Read: Big Shift in Derivatives! SEBI Fixes F&O Expiry Days – Tuesday vs Thursday Showdown
Broader Access, More Flexibility: What Traders Can Now Do
Here are four major flexibilities SEBI has introduced:
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Trades allowed during ban periods (if they reduce net risk). A position can be reduced to zero delta but not reversed.
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Enhanced Index Futures limits for different trader categories. For instance, FPI Category I or mutual funds can hold the higher of 15% of OI or ₹500 crore.
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Pre-open sessions for F&O contracts, mirroring equity markets, start from December 6, 2025. This will include the current month and—during rollover periods—the next month too.
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Eligibility rules for non-benchmark index F&O now include at least 14 constituents with capped weightages to ensure diversification.
These changes show SEBI’s focus on ease of participation without compromising on safety.
Limits by Trader Type: What You Need to Remember
To ensure no single entity dominates a counter, SEBI has introduced Entity Level Limits for single stocks:
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Retail investors: Max 10% of MWPL
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Prop brokers: Max 20%
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FPIs/Brokers combined: Max 30%
From July 1 to December 5, these changes will be phased in. Exchanges will prepare standard operating procedures (SOPs) in consultation with SEBI to enforce real-time checks, especially for heavy-volume players.
Also, Mutual Funds and Alternative Investment Funds (AIFs) will soon have to report options exposure on a delta-equivalent (FutEq) basis. A separate SEBI circular is expected for this.
Final Thoughts: What SEBI’s New F&O Rules Means for Indian Traders
With SEBI’s new F&O rules, a proactive stance can be seem in strengthening India’s derivatives ecosystem. The rules provide higher limits and greater flexibility, while introducing deeper risk checks that were long overdue.
For traders and institutions alike, this is an opportunity to adapt to a safer, more robust framework while continuing to scale their exposure—but with discipline.
Disclaimer: The views and investment insights provided here are based on publicly available information and do not constitute financial advice. Readers are advised to conduct their own research or consult certified financial experts before making investment decisions.
