sebi
Published on 11 July 2025
SEBI's Proposal for Enhanced Risk Metrics and Intraday Limits in Equity Derivatives
SEBI’s Proposed Framework: Delta-Based Risk Metrics & Intraday Limits in Equity Derivatives
Why the Shift?
On February 24, 2025, SEBI introduced a draft framework aimed at overhauling risk measurement and monitoring in India’s derivatives market. This move is meant to curb excessive speculative trading—especially in index options around expiry days—and to boost transparency and stability across all participants ([Securities and Exchange Board of India][1], [mint][2]).
From Notional to Delta: Rethinking Open Interest
Current System (Notional OI): Measures exposure by summing the notional value of futures and options but fails to account for actual price sensitivity. This led to inflated risk readings and frequent trigger of trading bans ([The Economic Times][3]).
Proposed System (FutEq or Delta-Based OI):
- Futures are weighted at delta = 1
- Options are delta-adjusted (−1 to +1 depending on strike and moneyness) This blended measure better reflects real exposure across both instrument types, allowing more accurate regulation and equity of exposure limits ([The Economic Times][3]).
Market Impact: A SEBI study (July–Sept 2024) showed potential ban days could drop from 366 to just 27—a 90% reduction—once delta-based OI is adopted ([LinkedIn][4]).
New Trading Limits: EOD & Intraday Caps
| Derivative Type | Measure | Current Limit | Proposed Limit |
|---|---|---|---|
| Index Options | Net EOD Delta | ₹500 crore | ₹1,500 crore |
| Gross EOD Delta | — | ₹10,000 crore | |
| Net Intraday Delta | — | ₹1,000 crore | |
| Gross Intraday Delta | — | ₹2,500 crore | |
| Index Futures | Net EOD | ₹500 crore | ₹1,500 crore |
| Intraday Gross | — | ₹2,500 crore |
- Intraday monitoring focused on net delta (₹1,000 crore) and gross delta (₹2,500 crore) limits for index options. Futures limits mirror this structure. These help exchanges flag large exposures mid-day and act in time to prevent systemic risk ([5paisa][5], [Nifty Trader][6], [Moneycontrol][7], [@Ricago][8]).
- SEBI is open to increasing the gross delta cap, as industry feedback has ranged from doubling (to ₹5,000 crore) up to ₹10,000 crore for adequate flexibility ([Moneycontrol][7]).
- Final norms confirmed a net EOD limit of ₹1,500 crore and allowed gross options positions up to ₹10,000 crore per PAN—significantly higher than the draft proposal ([Moneycontrol][9]).
Additional Measures & Trading Flexibility
- SEBI proposes allowing fresh trades during ban periods to offset exposure and reduce net delta, rather than compelling unwinding only ([LinkedIn][4]).
- Index futures new end-of-day limit raised to ₹1,500 crore, triple the current ₹500 crore cap ([LinkedIn][4]).
- SEBI aims to introduce pre-open and post-closing sessions to enhance liquidity and improve price discovery in derivatives markets ([mint][2]).
Limit Monitoring & Market Surveillance
- In an interim step, from March 28, 2025, SEBI required both NSE and BSE to adopt intraday monitoring mechanisms, capturing four random snapshots per day for index derivatives positions. No penalties will be imposed during this transition phase ([ICICI Direct][10]).
Why It Matters
- More accurate exposure tracking: Delta-based OI prevents traders from inflating positions using deep out-of-the-money options—a loophole in the notional system ([LinkedIn][4]).
- Market-aligned scaling: SEBI’s swept updates reflect international norms seen in US (CFTC) and EU (EMIR) systems, while fitting India’s unique structure and investor mix ([LinkedIn][4]).
- Fairer market structure: Intraday and gross/net delta limits better balance liquidity needs with systemic risk containment.
Final Word
SEBI’s 2025 consultation represents a transformational shift in how India regulates its largest and most complex derivatives market. Updates—from delta‑based OI and elevated net/gross caps to real-time monitoring—signal a clear focus on market integrity, transparency, and risk-based governance. With phased implementation extending through December 2025, and SEBI’s stated openness to data-driven revision, stakeholders have the opportunity to shape a stable yet flexible market ecosystem.