Under the NSE’s framework, a security enters the F&O ban list when the combined outstanding positions in futures and options exceed 95% of the permitted threshold, a regulatory cap based on the total number of shares available for trading by non-promoter shareholders.
Once a stock breaches this limit, no fresh F&O positions can be initiated, though existing positions may still be squared off. The mechanism is designed to curb excessive speculation and prevent disorderly market conditions, particularly near expiry periods.
IEX shares slide 15% after regulatory blow
IEX shares fell sharply by 15% to hit the lower circuit at Rs 159.70 on the BSE on Thursday morning, after the Central Electricity Regulatory Commission (CERC) formally approved the phased implementation of market coupling for India’s power exchanges. The stock has seen a surge in trading volumes and sell-side pressure, with over 5.85 crore pending sell orders reported on the NSE early in the session.
The CERC’s order, issued late Wednesday, sets in motion the coupling of the Day-Ahead Market (DAM) by January 2026, under which multiple power exchanges will submit buy and sell orders to a central Market Coupling Operator (MCO). The MCO will aggregate these bids to discover a single market clearing price across platforms. This development is expected to have significant implications for IEX, which currently holds a dominant position in the day-ahead and real-time segments of electricity trading.
What is the F&O ban and why it matters?
The F&O ban restricts traders from taking fresh positions in a stock’s derivatives contracts during the ban period, which typically lasts for one trading session. Only existing positions can be closed, and any violation, such as entering new contracts, can attract penalties from the exchange.According to Securities and Exchange Board of India (Sebi) norms, such violations could lead to fines of 1% of the position value (subject to a minimum of Rs 5,000 and up to Rs 1 lakh), and in some cases, further disciplinary action including trading suspensions.
The MWPL, which determines F&O ban thresholds, is reviewed and updated based on changes in shareholding patterns. It reflects the maximum allowable open interest in a stock’s F&O contracts and is calculated as a percentage of the free-float equity.
Market-wide bans are typically used to prevent speculative build-up and manipulative trading practices. The IEX episode comes amid broader regulatory changes in India’s power sector and adds to investor caution ahead of the company’s Q1 FY26 results, due later today.
Implications for IEX and its investors
The CERC’s move to initiate market coupling has long been viewed as a structural overhang for IEX, as it alters the competitive landscape for power exchanges. The coupling process is intended to bring pricing efficiency and uniformity but may also dilute the pricing power and trading volumes of individual exchanges like IEX.
Currently, IEX commands over 90% market share in the Day-Ahead Market (DAM) and Real-Time Market (RTM), both of which contribute significantly to its revenue. In FY24, DAM volumes alone were over 73 billion units, while RTM saw a 19% YoY growth. But with centralized price determination, the very role that made IEX indispensable competitive price discovery stands diluted, noted Harshal Dasani, Business Head at INVasset, PMS.
“While regulators aim to improve efficiency and transparency, investors fear revenue erosion and reduced platform stickiness. With the core business model under pressure and limited clarity on long-term profitability, markets have rightly reacted. For IEX, the days of monopoly-like pricing power may now be history,” said Dasani.
The timing of the regulatory announcement, just hours ahead of IEX’s quarterly earnings, has amplified market volatility. Investors and analysts will be closely watching the company’s commentary on how it plans to navigate the upcoming operational changes and its preparedness for the January 2026 implementation deadline.
For now, the F&O ban acts as a circuit breaker on speculative positions, even as fundamental concerns around regulatory shifts continue to weigh on the stock.
Also read | IEX shares hit 10% lower circuit after CERC nod for market coupling ahead of Q1 results
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)