India regulator’s latest rules do not restrict traders’ intraday derivatives positions, sources report

The Securities and Exchange Board of India (SEBI) is preparing to release new norms that will impact how open interest is calculated on individual securities. These proposed changes aim to provide more transparency and accuracy in the calculation process. SEBI’s move comes in response to concerns raised by market participants about the current method of calculating open interest, which some believe is prone to manipulation.

Open interest is a key metric in the derivatives market that represents the total number of outstanding contracts at any given time. It is used by traders and analysts to gauge market sentiment and predict potential price movements. However, there have been issues with the existing calculation method, particularly when it comes to single stock futures and options.

Under the current system, open interest in single stock futures and options is calculated based on the number of contracts outstanding at the end of the trading day. This method has been criticized for not accurately reflecting the true open interest in these securities. The proposed changes by SEBI seek to address these concerns and ensure a more accurate representation of open interest in individual securities.

One of the key changes in the new norms is the inclusion of physical settlement data in the calculation of open interest for single stock futures and options. This will help provide a more comprehensive picture of the total outstanding contracts and reduce the possibility of manipulation. By incorporating physical settlement data, the new norms aim to make the calculation process more robust and reliable.

Additionally, SEBI’s proposed changes will also impact how open interest is reported by exchanges and clearing corporations. The new norms will require these entities to provide more detailed information about the open interest in single stock futures and options, including data on physical settlement obligations. This increased transparency will enable market participants to make more informed decisions based on accurate and reliable data.

Overall, the upcoming changes to the calculation of open interest in single stock futures and options are expected to enhance transparency and integrity in the derivatives market. By addressing concerns about the current method of calculating open interest, SEBI aims to promote fair and efficient trading practices. Market participants will likely welcome these new norms, as they will provide more reliable information when trading individual securities in the derivatives market.