A stock enters the F&O Ban Period when the total market exposure in that stock crosses 95% of the Market Wide Position Limit (MWPL).  The ban is lifted once the exposure falls below 80% of MWPL.

This mechanism helps prevent excessive speculation and maintains market stability when too many derivative positions accumulate in a single stock.

What Is Market Wide Position Limit (MWPL)?

MWPL represents the maximum allowed exposure that all market participants collectively can hold in the derivatives of a particular stock.

Exchanges calculate MWPL based on factors such as:

• Free-float shares available for trading

• Overall trading volumes

• Regulatory thresholds

MWPL ensures that no stock becomes excessively leveraged through derivatives.

How Do Exchanges Measure Market Exposure?

Exchanges now measure exposure using Future Equivalent (FutEq) Open Interest, which calculates the actual market impact of all open positions.

Different instruments have different sensitivities to the stock price:

• 1 lot of Futures → behaves like the underlying (full impact)

• Deep ITM Call Option → behaves almost like Futures

• OTM Call Option → has reduced impact

• Puts → carry negative delta (opposite direction)

FutEq OI applies delta to each position to compute true exposure, making the calculation more market-accurate.

Example: How FutEq Is Calculated

Suppose you hold the following positions in the same stock:

• 1 lot long Future → Delta = 1 → FutEq = +1

• 1 lot long Call (delta = 0.5) → FutEq = +0.5

• 1 lot long Put (delta = –0.3) → FutEq = –0.3

Total FutEq = 1 + 0.5 – 0.3 = +1.2

This gives a more realistic view of your price exposure compared to simply counting three contracts.

Impact on Your F&O Positions When a Stock Enters Ban Period

When a stock is in the Ban Period:

❌ Not Allowed

• Fresh positions

• Rollovers

✔️Allowed

• Square-off of existing positions only

Important Caution

• If you square off one leg of a hedge, your FutEq OI may increase.

• If this results in a limit breach:

  • Your pending square-off orders may be cancelled.

  • Remaining positions may be auto squared off anytime after 2:00 PM, on a best-effort basis as per risk policy.

Penalties for Exposure Breach

Any breach of delta-based exposure limits during the Ban Period may attract regulatory penalties.
Such penalties, if imposed, may be recovered from the client.

For complete details, please refer to the official SEBI circular and the full regulatory framework.