June 29, 2024
New Delhi, India
The Securities and Exchange Board of India (SEBI) announced a revision to the eligibility criteria for the entry and exit of stocks in the derivatives segment of exchanges. This move aims to ensure a vibrant securities market ecosystem with adequate regulation and investor protection.
New Eligibility Criteria
Under the updated norms, the criteria for the exit of stocks will apply only to those that have been in the derivatives segment for at least six months. For existing stocks in the derivatives segment, the exit criteria based on performance will come into effect three months after the circular’s issuance. The previous revision of these criteria was in 2018.
Product Success Framework
In addition to the revised eligibility criteria, SEBI introduced a Product Success Framework for single stock futures and options. This framework aims to enhance liquidity and participation in the derivatives market, promoting market development and ensuring investor protection. The framework will be effective six months after the circular’s issuance.
Detailed Eligibility Criteria
- Market Capitalization and Traded Value:
- Top 500 stocks will be considered based on their average daily market capitalization and average daily traded value (ADTV) over the previous six months on a rolling basis.
- Median Quarter Sigma Order Size (MQSOS):
- The stock’s MQSOS over the last six months on a rolling basis should not be less than Rs 75 lakh.
- Market Wide Position Limit (MWPL):
- The stock’s MWPL on a rolling basis should be at least Rs 1,500 crore.
- Average Daily Delivery Value (ADDV):
- The stock’s ADDV in the cash market over the previous six months on a rolling basis should not be less than Rs 35 crore.
Product Success Framework Conditions
The following conditions will be used to evaluate the exit of a stock from the derivatives segment under the Product Success Framework:
- Active Trading Members:
- At least 15% of trading members active in all stock derivatives, or 200 trading members (whichever is lower), should have traded in any derivative contract of the stock on an average monthly basis during the review period.
- Trading Days:
- The stock should have traded on at least 75% of the trading days during the review period in the derivatives segment.
- Average Daily Turnover:
- The stock should have an average daily turnover (futures + options premium) of at least Rs 75 crore during the review period.
- Average Daily Notional Open Interest:
- The stock should have an average daily notional open interest (futures + options notional) of at least Rs 500 crore during the review period.
SEBI’s new measures are expected to foster a more robust and liquid derivatives market, ensuring that market activities align with investor protection and market development goals.
Disclaimer:
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