Market-wide position limit (MWPL) is a term from the Indian stock exchanges, the NSE and the BSE, for the cap on the total open interest that all market participants together may hold in the futures and options on a single stock. It is set under rules of the Securities and Exchange Board of India (SEBI) and is calculated for each stock by reference to its free float, the shares not held by the company's promoters.
The limit exists because stock derivatives in India can lead to delivery of shares, and outstanding positions that are large relative to the tradable supply invite a squeeze or market manipulation. When combined open interest across exchanges crosses a high threshold, which has long been 95 percent of the limit, the stock enters a ban period. During the ban, traders may only reduce existing positions. Normal trading resumes once open interest falls below a lower level. Separate caps apply to each client and clearing member.