SEBI’s New F&O Rules Explained: Delta-Based OI, New MWPL & What It Means for Your Trading

SEBI has introduced a major update to how risk is monitored in the Equity Derivatives market. These changes affect:

• How Open Interest (OI) is calculated
• How Market-Wide Position Limits (MWPL) are set
• How Ban periods are triggered
• How your positions can be managed during Ban
• PAN-level limits for index derivatives

This article breaks down the new rules with simple examples.

1. Delta-Based Open Interest (FutEq OI) – The Most Important Change

Earlier, OI simply counted the number of lots open in a stock. But this was incomplete — it didn’t show directional exposure or risk.

SEBI now uses Future-Equivalent OI (FutEq OI), which adjusts OI based on delta (price sensitivity).

Open Interest will now be delta-adjusted instead of simply being total position size. This has been done by SEBI to better reflect the actual risk of futures and options positions.

Do note, this may lead to the Delta-based OI for your positions increasing due to underlying stock price movement even if you don’t increase your position size.

Delta Refresher
• Futures: Delta = +1 or –1
• Call options: 0 to +1
• Put options: 0 to –1

🔍 Example: Old OI vs New Delta-Based OI

Your Position
• Long 1,000 lots of Reliance 2,500 CE (delta = 0.35)

Old Method
• OI = 1,000 lots
(Does not reflect actual exposure)

New Delta-Based Method
FutEq OI =
1,000 × 0.35 = 350 lots (future-equivalent exposure)
This now reflects your true directional risk.

🌟 Another Example — Hedge Position

Your positions:
• +100 lots Futures (delta = +1)
• –200 lots Puts (delta = –0.5)

FutEq OI calculation:
• Futures exposure = +100 × 1 = +100
• Put exposure = –200 × (–0.5) = +100
Total FutEq OI = 200 lots

Earlier, this hedge looked large (300 lots).
Now, exposure is correctly captured as 200 lots.
This is why SEBI has mandatory delta-based monitoring

2. New MWPL Rules: A More Realistic Exposure Cap

Earlier, MWPL = 20% of free-float shares, regardless of liquidity.
Now, MWPL = Lower of:

1. 15% of free-float, or
   
2. 65 × Average Daily Delivery Value (ADDV) With a minimum floor of 10% free-float.
   
   

🔍 Example: How New MWPL Is Calculated

Stock ABC
• Free-float shares = 10 crore
• 15% of free-float = 1.5 crore shares
• ADDV = ₹50 crore
• 65 × ADDV = ₹3,250 crore (converted to share equivalent by exchange)

Compute MWPL:
MWPL = Lower of (1.5 crore shares) or (share equivalent of ₹3,250 crore)
Assume share equivalent = 1 crore shares

👉 New MWPL = 1 crore shares (lower value)
Earlier MWPL would have been:
20% × 10 crore = 2 crore shares

📉 MWPL reduced from 2 crore → 1 crore, reducing excessive speculation.

3. Intraday MWPL Monitoring – Ban Can Trigger During Market Hours

Earlier: MWPL monitored only end of day.
Now: At least 4 intraday checks at random intervals.

What this means:
• A stock may enter Ban intraday
• It may exit Ban intraday
• Traders need to stay alert, especially on expiry/volatile days

4. Ban Entry & Exit Rules (New Exposure-Based Criteria)

Ban Entry
A stock enters Ban if:
• FutEq OI ≥ 95% of MWPL

Ban Exit
A stock exits Ban when:
• FutEq OI falls below 80% of MWPL (combined across exchanges)

🔍 Example: Ban Trigger Scenario
MWPL of Stock XYZ = 1 crore shares
FutEq OI reaches = 95 lakh shares
95 lakh ÷ 1 crore = 95% → Ban Triggered

5. What Happens to Your Positions When a Stock Is in Ban?

✔ Allowed:
• Square-off existing positions
• Rollover (futures) allowed

✘ Not Allowed:
• New positions
• Any action that increases net FutEq OI

⚠ Example: Hedge Complication During Ban
You hold:
• +100 lots Futures
• –100 lots Calls (delta 0.40)

Your current FutEq exposure:
• Futures = +100
• Calls = –100 × 0.40 = –40
Net = +60 lots
Now you try to square off calls in Ban.

New exposure:
• Futures = +100
• Calls = 0
Net = +100 lots
👉 Net exposure has increased from 60 → 100 lots
👉 Exchange may block order, cancel square-off, or force-reduce after 2 PM

This rule ensures no additional risk is created during Ban.

6. New Limits for Index Derivatives

Index Options (PAN Level)
• ₹1,500 crore net FutEq OI limit
• ₹10,000 crore gross long/short FutEq OI limit

Index Futures
• Higher of: 15% of OI or ₹500 crore for FPI Category I / Mutual Funds / Trading Member (Proprietary) / Clients
• Higher of: 10% of OI or ₹500 crore for FPI Category II (other than individuals, family offices and corporates)
• Higher of 5% of OI or ₹500 crore for FPI Category II (Individuals, family offices and corporates)

This reduces concentration risk in index positions.

7. Impact on Your F&O Positions During Ban

• No fresh positions are allowed in that stock once it enters Ban.
• Square-off of existing positions is allowed.
• Futures rollover is now permitted under the new rule.

However:
• If squaring off one leg of a hedge increases your overall FutEq OI,
• Exchanges may treat this as an increase in exposure, which is not permitted during Ban.

In such cases:
• Pending square-off orders may get cancelled.
• Non-compliant Positions may be force-reduced by our risk team after 2:00 PM to ensure compliance with SEBI’s rules.

Please note: Any breach of delta-based exposure limits monitored by Clearing Corporations may attract penalties, which will be recovered from the clients.

8. Quick Comparison — Old vs New Framework

📌 Final Thoughts

SEBI’s new framework brings more accurate exposure tracking, stronger liquidity-based limits, and stricter real-time monitoring.

For traders, the key points are:
• Watch delta-based exposure, not just lot counts
• MWPL may reduce for illiquid stocks
• Ban status is now dynamic and real-time
• Hedge adjustments during Ban can cause issues

Reference Documents

SEBI Circular: SEBI/HO/MRD/TPD-1/P/CIR/2025/79: Read Here

Exchange Circulars:

• NCL/CMPT/70085 (dated September 8, 2025),
  
• NCL/CMPT/70555 (dated September 30, 2025)
  
• NSE Circular NSE/SURV/71090 (dated October 31, 2025)
  
• BSE Circular (20251031-63) dated October 31, 2025.