Why is a security banned from trading?
A security is placed under a trading ban when the open interest in its derivatives crosses 95% of the Market Wide Position Limit (MWPL). This rule is enforced by the exchange to reduce excessive speculation and protect market integrity.
What is Market Wide Position Limit (MWPL)?
MWPL is the maximum number of open positions allowed in a particular stock’s derivative contracts (futures and options) across all participants.
When is a security banned?
- A security enters the ban list when its total open interest exceeds 95% of MWPL
- The ban is lifted only after the open interest drops below 80% of MWPL
What happens during a trading ban?
- New positions cannot be initiated
- Only square-off of existing positions is allowed
- Intraday and positional trades are restricted to reduce risk exposure
To avoid penalties or order rejections, always check if a security is under the F&O ban before placing derivative trades.
What if...
| Scenario | Outcome |
|---|
| I try to place a new F&O order in a banned stock | The order will be rejected by the exchange. |
| I already hold a position | You can square off (exit) but not increase the position. |
| The ban is lifted the next day | Normal trading resumes and new positions can be initiated. |
Last updated: 25 Jun 2025
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