SEBI F&O rules: What changes from Oct 1, 2025

What the regulator is signalling now

SEBI officials have indicated the regulator is not planning additional steps beyond the framework already announced. Whole-time member Ananth Narayan G. Pandey said the system in place will continue, with no fresh curbs on futures and options trading. He also clarified there are no near-term changes planned to weekly expiries beyond what has already been set out. That matters because several reforms have already tightened leverage and raised the cost of participation for many traders. It also sets expectations that markets should focus on implementation and compliance rather than anticipating new restrictions immediately. The broader backdrop is SEBI’s push to curb excessive speculation and strengthen risk management in equity derivatives.

Higher transaction taxes change trading economics

The framework sits alongside increases in Securities Transaction Tax (STT), which directly affects active traders’ breakeven levels. STT on futures contracts has been increased to 0.05% from 0.02%. For options, the levy has been raised to 0.15% from the earlier 0.1% and 0.125%, with the hike applying both on the premium and on exercise. These changes raise the all-in cost of frequent trading strategies, particularly short-horizon index options activity. Higher taxes do not prevent trading, but they can reduce the attractiveness of very high turnover approaches. For brokers and exchanges, it also shifts client behaviour toward fewer, higher-conviction trades.

Contract sizes and capital needs have moved up

One visible impact has been the jump in typical contract value and the capital needed to run similar exposure. Earlier, traders could take positions in contracts valued at about ₹5–10 lakh with capital of around ₹1.2 lakh. Now, typical contract values are described as ₹15–20 lakh, pushing the capital requirement to roughly ₹3.5 lakh. In SEBI’s circular language, a derivative contract must have a value not less than ₹15 lakh at introduction. Lot sizes are to be set so that the contract value on the day of review remains within ₹15 lakh to ₹20 lakh. This is aimed at reducing small-ticket, high-frequency retail participation by increasing the minimum economic commitment per trade.

Weekly expiries have been rationalised

Trading opportunities have narrowed after a reduction in weekly expiry days. Earlier, multiple indices offered weekly expiries across six days of the week. This has now been restricted to just two weekly expiries, limited to Nifty and Sensex. Separately, SEBI’s stated direction has been to rationalise weekly index derivatives to one benchmark per exchange, with the intent of concentrating liquidity and lowering excessive churn. Pandey’s remarks indicate no additional near-term tweaks beyond the framework already in place. For market participants, the practical implication is fewer expiry-related trading windows and potentially more concentrated activity on the permitted expiries.

Upfront premium collection and tighter expiry-day margins

SEBI has moved to tighten margin discipline in options. Brokers are no longer permitted to offer intraday credit for options buying, which means traders must pay the full premium upfront. In addition, an extra 2% margin is now imposed on expiry-day option selling. SEBI has also set out the removal of calendar spread margin benefits on expiry day, a change intended to reduce the misuse of spread offsets during peak risk periods. Taken together, these measures increase the capital required to run short options and expiry-day strategies. They also push participants to maintain clearer collateral backing for exposures rather than relying on intraday funding.

Position limits and MWPL: a new way to set the ceiling

From Wednesday, October 1, several changes in equity derivatives are scheduled to take effect, focused on position limits and monitoring. The Market-Wide Position Limit (MWPL), the maximum number of bets allowed in a stock, will now be linked to cash volume and the free float of the scrip. The new MWPL threshold is capped at the lower of 15% of free float or 65 times the cash volume across exchanges. SEBI has also introduced individual entity-level position limits for single stocks. The limits are described as 10% of MWPL for individuals, 20% for proprietary brokers, and 30% overall for FPIs and brokers. The intent is to curb excessive concentration and large directional positioning relative to the cash market’s ability to absorb risk.

Intraday surveillance gets sharper for index derivatives

SEBI has directed exchanges to step up intraday monitoring through multiple checks. One set of limits described caps net intraday positions in index derivatives at ₹5,000 crore per entity and gross intraday positions at ₹10,000 crore from Wednesday. Exchanges have been asked to monitor positions through at least four random snapshots during the trading session. A separate specification for index options sets a net Futures Equivalent Open Interest (FutEq OI) limit of ₹1,500 crore and a gross limit of ₹10,000 crore per PAN. On expiry days, breaches are stated to attract penalties or surveillance deposits. Additional exposures are allowed if fully backed by securities or cash collateral, reinforcing the principle of funding risk with actual collateral.

Ban-period rules and what changes in practice

SEBI’s framework continues to rely on MWPL utilisation to trigger a ban. When a stock’s FutEq OI exceeds 95% of its MWPL, a ban period is triggered. During the ban period, investors can only reduce existing positions, and new positions or switching between long and short are prohibited under the described rule set. But the October 1 changes also state that trades will be allowed in F&O stocks even during the ban period if the trade reduces the risk of the portfolio. This is designed to preserve the ability to hedge or trim exposures without adding fresh risk. It also aligns ban-period mechanics more closely with risk-reduction outcomes.

Key dates and measures at a glance

Why the changes matter for retail and market structure

The combined effect of higher contract sizes, upfront premium collection, and added expiry-day margins is to raise the entry cost of frequent options trading. Meanwhile, tighter MWPL-linked limits, intraday surveillance snapshots, and explicit per-entity caps aim to reduce concentration and reduce the scope for outsized intraday build-ups. With fewer weekly expiries and liquidity being directed toward select benchmarks, activity may become more concentrated in fewer contracts and fewer sessions. The STT hikes further change the cost-benefit math for high-turnover strategies. SEBI’s stated objective, across the measures listed in consultation and circulars, is stronger risk alignment between the derivatives market and underlying cash market liquidity.

Conclusion

SEBI’s equity derivatives framework is shifting toward higher capital discipline, tighter position limits, and more frequent surveillance checks, with key rules taking effect from October 1 and additional milestones through late 2025. Pandey’s comments suggest the regulator is not planning fresh curbs in the near term, focusing instead on the implementation of the announced framework. The next scheduled changes referenced include new eligibility norms for non-benchmark index derivatives from November 3 and the introduction of pre-open and post-closing sessions for F&O from December 6. Market participants will be watching how these measures affect liquidity, intraday risk build-up, and compliance outcomes across brokers and exchanges.