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Issuers of MLDs or structured products made representations to SEBI seeking exemption from its proposed exposure caps as part of the move to a ‘future equivalent’ open interest
The Securities and Exchange Board of India (SEBI) is planning to exempt the proposed long delta end-of-day position limits in index options for structured products and market-linked debentures (MLDs), sources said.
Structured products or MLDs are pre-packaged investments tied to an index or basket of securities combining debt and equity derivatives used to hedge their investments. The industry is estimated to be worth nearly ₹30,000-40,000 crore including listed MLDs.
Issuers of MLDs or structured products made representations to SEBI seeking exemption from its proposed exposure caps as part of the move to a ‘future equivalent’ open interest. The industry has raised concerns that such limits can hinder genuine hedging and cause unnecessary unwinding of positions.
“We are in discussion with entities issuing structured products and market-linked derivatives regarding exemption from position limits in index options,” said a regulatory source. “SEBI will take a view after examining the representations.”
Another source aware of the discussions said that the regulator agrees with some of the representations as hedging tools should not have such limits, as a matter of principle. It is understood that SEBI will come out with certain relaxations in addition to increasing the proposed delta long gross limits.
“MLD issuers are hedgers. These products don’t speculate, but in fact support market volatility... SEBI knows hedging is important and it is unlikely that in the process of limiting speculation, it would cause any collateral damage,” an industry source said.
SEBI did not comment on an email query.
The regulator is expected to revise its initially proposed gross limits to ₹10,000 crore and net end-of-day limit at ₹1,500 crore on a delta-based open interest. SEBI is also expected to do away with the proposed intraday net limit of ₹1,000 crore and gross limit of ₹2,500 crore, but strengthen the monitoring by stock exchanges to curb manipulation, according to sources.
In February, the regulator had proposed a net end-of-day future equivalent limit of ₹500 crore and a gross limit of ₹1,500 crore as part of the new method. Currently, there is a net limit of ₹500 crore and no gross limit on positions.
Published on May 28, 2025
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