Stock Market: SEBI's F&O position limit affects several shares

Stock Market: Regulator SEBI`s recent decision to limit positions that can be taken in the futures and options (F&O) market has resulted in a ban period starting Monday for some stocks. Markets regulator SEBI on Friday announced measures to control the high volatility which has plagued the country`s stock markets. The Sebi said that these new norms will be effective from the beginning of trade on March 23 for a period of one month.

The security market regulator last week decided to bring down the market-wide position in F&O contracts of a particular stock to 50 per cent from the earlier 95 per cent and also increased the F&O margins where positions are higher above the revised cap.

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The affected stocks include Vodafone Idea, Indiabulls Housing Finance, Yes Bank, Jindal Steel & Power, Adani Enterprises, Just Dial, NCC, PVR and Punjab National Bank, among others.

They have been put in ban period as their open positions exceed the revised limits as per the latest SEBI circular, analysts said.

"Once client square up outstanding position, new position cannot be created even on same day," said Deepak Jasani, Head of Retail Research at HDFC Securities.

The current penalty structure adopted by the stock exchanges, clearing corporations may be enhanced to 10 times of the minimum and five times of the maximum penalties specified by the stock exchanges or clearing corporations, to function as an effective deterrent in the current market context.

For stocks in F&O segment meeting the following criteria, SEBI decided to revise MWPL may be revised to 50 per cent of the existing levels. Average Daily Price High Low variation percentage (during last five trading days) should be more than or equal to 15 per cent or Average MWPL utilization percentage (during last five trading days) should be more than or equal to 40 per cent.

"In the event MWPL utilization in a security crosses 95 per cent, derivative contracts enter into a ban period, wherein, all clients/trading members are required to trade in the derivative contracts of said scrips only to decrease their positions through offsetting positions. Any increase in open positions would attract appropriate penal and/or disciplinary action of the stock exchanges/clearing corporations," said the SEBI order.