Description

BSE introduces new Market Wide Position Limit (MWPL) methodology and enhanced monitoring procedures for equity derivatives trading.

Summary

BSE has introduced a new Market Wide Position Limit (MWPL) methodology for equity derivatives and enhanced risk monitoring procedures. The new framework includes quarterly recalculation of MWPL based on free float and average daily delivery value, along with strengthened entity-level position monitoring during ban periods.

Key Points

  • New MWPL calculation: Lower of 15% Free Float or 65 times market wide Average Daily Delivery Value (ADDV)
  • Minimum floor of 10% Free Float applies to all calculations
  • MWPL will be recomputed quarterly based on latest free float and preceding 3-month ADDV data
  • Ban period triggers when Future Equivalent Open Interest exceeds 95% of MWPL
  • Normal trading resumes when combined Future Equivalent Open Interest falls to 80% of MWPL
  • Enhanced entity-level monitoring during ban periods with daily position tracking

Regulatory Changes

  • Adoption of SEBI’s new MWPL methodology replacing previous calculation methods
  • Quarterly recalculation schedule instead of previous frequency
  • Introduction of delta-based Future Equivalent position calculations for entity monitoring
  • Discontinuation of gross open interest monitoring in favor of Future Equivalent metrics
  • Implementation of base position tracking system for entities during ban periods

Compliance Requirements

  • Clearing Corporations must obtain latest free float data from stock exchanges quarterly
  • Daily monitoring of Market Wide Future Equivalent Open Interest against 95% MWPL threshold
  • Dissemination of MWPL calculations on CC websites by 20th of last month each quarter
  • Publication of daily MWPL utilization data and stocks under ban on CC websites
  • Implementation of entity-level position tracking and violation detection systems
  • Use of SPAN file delta parameters for Future Equivalent calculations

Important Dates

  • MWPL applicable from October 1, 2025 will use data from June 16 to September 15, 2025
  • Quarterly dissemination deadline: 20th of last month of reference quarter
  • Daily monitoring and reporting requirements effective immediately

Impact Assessment

  • Standardizes position limit calculations across market participants and clearing corporations
  • May result in different position limits for some stocks compared to previous methodology
  • Enhanced monitoring could lead to more frequent identification of limit violations
  • Improved risk management through delta-adjusted position calculations
  • Potential impact on trading strategies that rely on maximum position utilization
  • Corporate actions may require mid-quarter MWPL adjustments based on adjustment factors

Impact Justification

Introduces significant changes to derivatives position limit calculation and monitoring that affects all equity derivatives trading