Position Limits for Equity Derivatives
A. Index Future & Options
Market Level:
There is no market wide position limits specified for index futures or Options contracts.
Client Level/ NRI/Sub Accounts / FPI Category III
A self-disclosure requirement similar to that in the take-over regulations is prescribed as under:
Any person or persons acting in concert who together own 15% or more of the open interest shall be required to report this fact to the exchange and failure to do so shall attract a penalty as laid down by the exchange / clearing corporation / SEBI.
Trading Member/FII/FPI Category I & II Mutual Fund
a. The trading member/ FII/FPI Category I & II / Mutual Fund position limits in equity index futures or index options contracts shall be higher of:
b. Rs.500 Crore OR
c. 15% of the total open interest in the market in equity index futures or index options contracts.
This limit would be applicable on open positions in all futures or index options contracts on a particular underlying index.
B. STOCK FUTURS & OPTIONS
Market Level
The market wide position limit for single stock futures and stock option contracts shall be linked to the free float market capitalization and shall be equal to 20% of the number of shares held by non-promoters in the relevant underlying security (i.e., free-float holding). This limit would be applicable on aggregate open positions in all futures and all option contracts on a particular underlying stock.
The Exchange enforces the market wide limits through administrative measures, in the manner detailed below:
At the end of each day the Exchange shall test whether the market wide open interest for any Security exceeds 95% of the market wide position limit for that Security. If so, the Exchange shall take note of open position of all client/TMs as at the end of that day in that Security, and from next day onwards the members/client shall trade only to decrease their positions through offsetting positions. While the Exchange will take this action only at end of day, they shall disclose real time information about the market wide open interest as a percentage of the market wide position limits.
At the end of each day during which the ban on fresh positions is in force for any Security, the Exchange shall test whether any member or client has increased his existing positions or has created a new position in that Security. If so, that client shall be subject to a penalty equal to a specified percentage (or basis points) of the increase in the position (in terms of notional value). The penalty shall be recovered before trading begins next day. The Exchange shall specify the percentage or basis points, which shall be set high enough to deter violations of the ban on increasing positions.
The normal trading in the Security shall be resumed after the open outstanding position comes down to 80% or below of the market wide position limit.
Client Level/ NRI/Sub Accounts / FPI Category III
The gross open position across all derivative contracts on a particular underlying stock should not exceed the higher of:
1% of the free float market capitalization (in terms of number of shares). or 5% of the open interest in the derivative contracts on a particular underlying stock (in terms of number of contracts).
These position limits would be applicable on the combined position in all derivative contracts on an underlying stock at an exchange.
This requirement may not be monitored by the exchange on a real time basis, but if during any investigation or otherwise, any violation is proved, penalties can be levied.
Trading Member/FII/FPI Category I & II /Mutual Fund
The combined futures and options position limit shall be 20% of the applicable Market Wide Position Limit (MWPL).