The Securities and Exchange Board of India (SEBI) has proposed a shift in the method used to calculate trading member (TM) position limits for index options. The change would move from the current notional-value method to a delta-based Future Equivalent (FutEq) measure. This transition aims to align these limits more closely with client-level limits and enhance market integrity.
In a consultation paper released on Thursday, SEBI highlighted the inconsistencies created by the existing system, which employs different metrics for clients and trading members. In May this year, client-level limits were adjusted to a delta-adjusted metric, with caps set at ₹1,500 crore on a net FutEq basis and ₹10,000 crore for both gross long and gross short FutEq positions. These changes were designed to provide a more accurate assessment of risk.
At present, trading members can maintain the higher of ₹7,500 crore or 15 percent of market-wide open interest in index futures or options. The fixed limit of ₹7,500 crore can lead to disproportionately large positions in indices with low open interest, potentially allowing a single trading member to control a significant portion of the market.
SEBI noted that this lack of alignment has raised concerns among market participants. The regulator asserted, “Delta-based limits offer a better measure of risk for open option positions.” This uniformity ensures that futures and options open interest is additive, facilitating improved monitoring processes.
To address these concerns, SEBI has proposed to cap TM limits for index options at 15 percent of the market-wide FutEq open interest. Additionally, to prevent any single trading member from dominating less liquid indices, an absolute slab system ranging from ₹2,000 crore to ₹12,000 crore has been suggested, contingent upon the market-wide open interest during the preceding quarter.
No changes have been proposed for index futures, as their delta is consistently 1, making notional values and FutEq measures identical.
SEBI emphasized the importance of this alignment in maintaining consistency across risk controls and mitigating concentration risks in less actively traded contracts. The regulator is open to public comments on this proposal until December 26.
Moving forward, stock exchanges and clearing corporations will be mandated to publish market-wide FutEq open interest at the conclusion of each trading day. This requirement will enable trading members to accurately assess their limits for subsequent sessions.
Published on December 4, 2025.
