SEBI proposes delta-based Future Equivalent limits for trading members in index options

The Securities and Exchange Board of India (SEBI) has proposed shifting the way trading member (TM) position limits for index options are calculated, from the current notional-value method to a delta-based Future Equivalent (FutEq) measure, to align them with client-level limits and strengthen market integrity. The existing system uses different metrics for clients and trading members, creating inconsistencies when aggregating positions, the regulator said in a consultation paper on Thursday. Client-level limits were shifted to the delta-adjusted metric with caps of ₹1,500 crore on a net FutEq basis, and ₹10,000 crore each on gross long and gross short FutEq in May this year, as they provide a more realistic representation of risk. Currently, TMs can hold the higher of ₹7,500 crore or 15 per cent of market-wide open interest in index futures or options. The absolute limit of ₹7,500 crore can become disproportionately large in indices with low open interest, allowing a single TM to potentially control a significant share of the market, the regulator said. SEBI said that the lack of alignment has raised concerns from market participants. “Delta-based limits offer a better measure of risk for open option positions,” the regulator said in its paper. It added that using a uniform metric ensures futures and options open interest becomes additive, improving monitoring. The regulator has proposed to cap TM limits for index options at 15 per cent of market-wide FutEq open interest. To prevent a single trading member from cornering positions in less liquid indices, SEBI has also suggested an absolute slab system ranging from ₹2,000 crore to ₹12,000 crore, depending on the market-wide open interest in the preceding quarter. For index futures, no change has been proposed since their delta is always 1, making notional and FutEq identical. “This alignment is essential to ensure consistency across risk controls and to prevent concentration risk in thinly traded contracts,” SEBI said. Public comments have been invited until December 26. Stock exchanges and clearing corporations will be required to publish market-wide FutEq open interest at the end of each trading day so that TMs can assess their limits for the following session. Published on December 4, 2025