The Securities and Exchange Board of India (Sebi) has put forward a significant proposal to revise how position limits for stockbrokers in the equity derivatives segment are calculated. The move aims to create consistency and better reflect real market risk across the trading ecosystem.
Bridging the Mismatch in Risk Measurement
Currently, a discrepancy exists in how positions are monitored. While client-level limits for index derivatives were shifted to a delta-adjusted futures-equivalent (FutEq) measure in May 2025, the limits for trading members (brokers) have remained on an older, notional basis. This delta-based method converts all futures and options contracts into a single, risk-adjusted number, offering a more accurate picture of actual market exposure than simply counting contracts.
Sebi, in a consultation paper released on Thursday, highlighted that this mismatch has led to inconsistencies in market-wide position monitoring. The regulator now seeks to fully align broker-level limits with the client-level framework.
The Proposed Slab-Based Structure
Under the new proposal, Sebi introduces a slab-based structure of absolute FutEq limits for index options. This structure is designed to scale with the depth and liquidity of each index, addressing a key concern with the old system.
The existing absolute limit of ₹7,500 crore for brokers, while offering flexibility, raised the risk of a single trading member capturing a disproportionate share of the market in indices with lower open interest (OI).
The proposed slabs are as follows:
- A minimum absolute limit of ₹2,000 crore when the average daily FutEq OI is below ₹10,000 crore.
- This limit rises progressively, reaching a maximum of ₹12,000 crore when the average daily FutEq OI exceeds ₹50,000 crore.
The final applicable limit for a broker would be the higher of this new absolute ceiling or 15% of the market-wide FutEq open interest. For index futures, Sebi has proposed no changes to the current limits.
Enhancing Stability and Compliance
The shift to a unified FutEq metric at both client and broker levels is expected to enhance overall market stability. It ensures that position limits are consistently risk-based across the board.
To facilitate this transition and help brokers monitor compliance, stock exchanges will provide end-of-day market-wide FutEq open interest data for each index. This data will serve as the reference limit for the next trading day.
Furthermore, clearing corporations will supply delta values for options contracts within the daily SPAN file—the standard risk report containing margin calculation parameters. This will enable brokers to compute their real-time FutEq exposure accurately. Trading members will continue to be required to adhere to these limits on an end-of-day basis.
Sebi has invited public comments on this proposal until 26 December 2025 through an online submission process. This move marks another step by the regulator to refine the derivatives market framework, following its recent actions in the equity F&O space.
