Description

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

Summary

BSE introduces new Market Wide Position Limit (MWPL) methodology for equity derivatives with enhanced risk monitoring procedures. The new system calculates MWPL as the lower of 15% Free Float or 65 times market wide Average Daily Delivery Value, subject to a floor of 10% Free Float. Enhanced monitoring includes ban period triggers at 95% utilization and entity-level position tracking during ban periods.

Key Points

  • New MWPL calculation: Lower of 15% Free Float or 65x market wide ADDV, with 10% Free Float floor
  • Quarterly recalculation based on latest free float and 3-month ADDV data
  • Ban period triggered when Future Equivalent Open Interest exceeds 95% of MWPL
  • Trading resumes when combined FutEq OI drops to 80% of MWPL
  • Entity-level position monitoring during ban periods using delta-based calculations
  • Base position updates only for trades that decrease FutEq open interest

Regulatory Changes

  • Adoption of new MWPL methodology replacing existing calculation methods
  • Introduction of delta-based entity position monitoring during ban periods
  • Discontinuation of gross open interest monitoring for MWPL
  • Enhanced dissemination requirements for MWPL utilization data

Compliance Requirements

  • Clearing Corporations must obtain latest Free Float data from Stock Exchanges
  • Quarterly MWPL recalculation and dissemination by 20th of last reference quarter month
  • Daily monitoring of 95% MWPL threshold for ban period determination
  • Daily dissemination of MWPL utilization and banned stocks on CC websites
  • Entity position tracking and violation identification during ban periods
  • Use of 2 PM delta values from SPAN parameter files for position calculations

Important Dates

  • MWPL applicable for 3 calendar months from calculation date
  • Quarterly recalculation timeline: e.g., Oct 1, 2025 MWPL uses June 16 - September 15, 2025 data
  • Daily end-of-day monitoring and next-day ban implementation
  • 2 PM delta parameter file timing for position calculations

Impact Assessment

High impact on equity derivatives market structure and risk management. New methodology may result in different position limits for various stocks, affecting trading strategies and risk exposure. Enhanced monitoring provides better risk control but increases compliance burden on clearing corporations and market participants. Entity-level tracking during ban periods ensures more precise position management and violation detection.

Impact Justification

Introduces new MWPL calculation methodology affecting all equity derivatives trading and risk monitoring