India’s market regulator, the Securities and Exchange Board of India (SEBI), on Thursday proposed a shift in how position limits for equity index options are set, moving from total contract value to delta-based limits that more accurately reflect the price sensitivity and risk of positions, Reuters reports.
The new framework is intended to align limits for trading members with client-level positions and prevent any single broker from holding an outsized share of market positions when overall activity is thin. Delta measures how much an options portfolio’s value changes when the underlying asset moves by 1 rupee, and delta-adjusted limits would use this sensitivity to calibrate exposure.
Under the proposal, trading members could hold up to 15% of total market-wide positions in equity index options on a delta-adjusted basis. Position limits for index futures would remain unchanged at 75 billion rupees ($835 million) or 15% of total market-wide open interest.
To maintain flexibility during low market activity, SEBI also suggested slab-based absolute limits, ranging from 20 billion rupees to 120 billion rupees depending on average daily turnover in the previous quarter. The regulator has invited public comments on the consultation paper by December 26.
