Why do F&O stocks enter a ban period? What does it mean?
Trading in the F&O segment requires understanding a few terms:
Open Interest (OI)- The total number of outstanding (open) derivative contracts held by investors, that have not been settled for a particular asset.
Market Wide Position Limit (MWPL)- The maximum number of open F&O contracts permitted for a particular underlying stock. This limit is set by the exchange. Hence, it is the maximum permitted OI for a particular underlying stock
- If the combined OI of a stock F&O contract crosses 95% of its MWPL, all F&O contracts of that stock are put under a ban period by the exchange.
- When stock F&O contracts are under a ban period, no fresh positions are allowed for any F&O contracts of that stock. Only exiting of existing positions is allowed. However, the rollover of futures positions will now be allowed, subject to no change in FutEq OI. For placing such orders, please contact the branch or Customer Care.
- You will be allowed to square off your existing positions in the stock in Ban Period. However, if one leg of the hedge position is squared off, it will lead to an increase in FutEq OI.
- If FutEq open interest of the your end of day position in the stock is less than or equal to the FutEq open interest of base position without any change in sign, then the same shall not be treated as a violation. All other cases shall be identified as a violation and will be levied penalty.
* The ban is applicable only to stock F&O contracts, and not to index contracts such as NIFTY, BANKNIFTY * There are no restrictions on trading in the concerned stock in the cash segment * Any breach observed by Clearing Corporations during monitoring of positions during ban period may attract penalty which may be recovered from trading a/c.
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