The Securities and Exchange Board of India (SEBI) has come up with a new framework for risk monitoring and increased the position limits for futures and options. In its latest circular, the markets watchdog said it had changed the method to calculate the value of open interest (OI) from notional value-based to delta-based. The new method will weigh OI by the price sensitivity making it impossible to manipulate trades.

SEBI has also increased the limits for positions for options. The net end-of-day open interest limit for options will be ₹1,500 crore and gross OI will be at ₹10,000 crore, SEBI said in the circular. For futures, the OI limits are fixed based on the type of investors ranging from 5% of future OI value to 15% of future OI value.

The regulator has decided not to impose limits on intraday trading.

“This is a progressive step. Delta-adjusted open interest is a true reflection of the positions taken by traders at large. In effect, positions are being assigned weights as per the delta, making the risk management framework stronger,” said Sahaj Agrawal, derivatives analyst at Kotak Securities. 

SEBI had come out with a consultation paper in February to tighten rules on derivative contracts after it discovered growing concerns of few people manipulating the market and gaining benefits. The proposals were reportedly too stringent for the market. SEBI came out with the circular after receiving comments from the stakeholders on the paper. It has set a phased timeline for exchanges to implement these steps till December 6.