The Securities and Exchange Board of India (Sebi) has proposed revising the calculation method for position limits for trading members in the equity derivatives segment.
The regulator now seeks to align broker-level limits with the delta-based framework introduced for clients earlier this year. A delta-based method converts all futures and options into a single risk-adjusted number, allowing position limits to reflect actual market risk rather than just contract counts. It offers a more accurate way to capture risk across futures and options positions.
In its consultation paper released on Thursday, the regulator said the current system, where client positions are measured using the futures equivalent (FutEq) metric while trading member (TM) limits are tracked on a notional basis, has created a mismatch.
In May 2025, Sebi moved client-level position limits for index derivatives from notional contract value to a delta-adjusted FutEq measure, which reflects the actual risk of an options position based on its price sensitivity.
The regulator said under this method, option positions, once converted into futures-equivalent terms, are simply added to index-futures positions to give a single combined open-interest number.
Clients currently face a limit of ₹1,500 crore on a net FutEq basis per index, or ₹10,000 crore on a gross long or gross short FutEq basis. However, trading member limits for index options, set at the higher of ₹7,500 crore or 15% of market-wide notional open interest, were never updated to the new metric. This has led to inconsistencies in how positions are monitored across the market.
While the existing absolute limit gives brokers flexibility, especially when open interest in a particular index is low, it also raises the risk of a single trading member capturing a disproportionate share of the market.
“For index derivative products with lower OI (open interest), the absolute limit of ₹7,500 crore could result in a single TM capturing a significant proportion of OI in the index,” the regulator said in the draft paper.
Sebi is proposing a slab-based structure of absolute FutEq limits for index options, designed to scale with the depth and liquidity of each index.
Under the proposal, brokers would be allowed a minimum absolute limit of ₹2,000 crore when the average daily FutEq OI is below ₹10,000 crore, rising to ₹12,000 crore when average OI exceeds ₹50,000 crore.
The applicable limit for a trading member would be the higher of this absolute ceiling or 15% of market-wide FutEq open interest. For index futures, no changes were proposed.
For options, Sebi wants all trading member-level calculations to shift fully to FutEq. This would align the metric at both client and broker levels and, according to the regulator, enhance market stability by ensuring position limits are consistently risk-based.
To help brokers monitor compliance, stock exchanges will provide end-of-day market-wide FutEq open interest for each index, which will serve as the reference limit for the next trading day.
Clearing corporations will provide delta values for options contracts along with the daily SPAN file, enabling brokers to compute their real-time FutEq exposure. The SPAN file is a daily risk report published by clearing corporations that contains all the parameters brokers need to calculate margins, such as volatility, price scans, risk arrays and so on.
Trading members will continue to be required to comply with limits on an end-of-day basis.
Sebi has invited public comments on the proposal until 26 December 2025 through an online submission process.
