Market- Wide Position Limit (MWPL) (in the stock market)- is a devise to limit to curb excessive speculation in the derivative market of the stock market. Above the MWPL of a stock, derivative trading is blocked. MVPL is calculated on 20 % of the non- promoter holding in the stock and includes positions taken in futures as well as options. For instance, if the equity base of a company consists of 100 shares with non- promoter holding at 40 % (40shares), the number of shares considered fro MWPL will be 8 shares (20% of 40 shares). At the end of the day, outstanding positions in that security should not exceeding 95 % of this limit. So in this case, outstanding positions should not be more than 7.6 shares (95 % of 8 shares). If that limit is exceeded, the exchange bans traders from taking fresh positions till some of the existing positions are unwound.
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