SEBI Rules Explainer: Amid the stock market turmoil, news emerged on SEBI's biggest rules to date.:

News Topical, Digital Desk : According to sources received by Moneycontrol, market regulator SEBI (Securities and Exchange Board of India) is preparing to tighten the controls on brokers' derivatives exposure. Recently, position limits were breached several times in indices like Nifty, Sensex, and Bank Nifty. To address this, SEBI is considering replacing the "one-size-fits-all" hard limit with a slab-based framework. This new system will set limits based on quarterly delta-adjusted open interest (OI), which will increase risk control and transparency.

New regulations on derivatives are continuously being introduced in the Indian stock market. Meanwhile, SEBI found that several brokers had exceeded the position limits set for index options. Keeping this in mind, the regulator is now planning to implement a slab-based limit structure.

What will change? Currently, brokers' position limits are based on notional value. This means that the larger value of a broker's client positions (long and short) is considered open interest. However, starting May 2025, this system has been changed to delta-adjusted (futures equivalent) at the client level. Now, this change is planned at the broker level as well.

New Slab System As per SEBI's proposed system OI < ₹10,000 crore → Limit ₹2,000 crore ₹10,000–30,000 crore OI → Limit ₹6,000 crore ₹30,000–50,000 crore OI → Limit ₹10,000 crore OI above ₹50,000 crore → Limit ₹12,000 crore This limit will be updated every quarter based on the average delta-adjusted OI.

Why is this change necessary In May 2025, there were several limit breaches in Nifty, Bank Nifty and Sensex options. This made it clear that the old framework was not able to capture the risk properly. The delta-based system will also include the price sensitivity of the position, which will help in better understanding the real risk.

What impact will it have on brokers? SEBI has clarified that brokers' position limits will always be the higher of the delta-based limit or the hard cap. This means that the limits will not be reduced, but will instead become more transparent and realistic. Until April 2025, clearing corporations handled this oversight, and the penalties were strict. However, after the exchanges assumed responsibility, the penalties have become lighter. SEBI has warned that if violations continue, stricter penalties may be imposed.