SEBI Revises Eligibility Criteria for Derivatives Market Stocks

Securities and Exchange Board of India (SEBI) announced a revision in the eligibility criteria for the entry and exit of stocks in the derivatives segment of exchanges on Thursday. The new norms specify that the exit criteria will only apply to stocks that have been in the derivatives segment for at least six months. For existing stocks, the exit criteria based on performance will be applicable three months after the issuance of the circular. The last revision in these criteria was in 2018.

"To ensure the continued development of a vibrant securities market ecosystem with appropriate regulation and investor protection, the Board has approved a revision in eligibility criteria for entry and exit of stocks in the derivatives segment of exchanges," stated a SEBI release.

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Product Success Framework Introduced

SEBI has introduced a Product Success Framework (PSF) for single stock futures and options. This framework aims to ensure that the liquidity and participation in the derivative markets support market development, regulation, and investor protection. The framework will take effect six months after the circular is issued.

Revised Eligibility Criteria for Entry or Exit

• Market Capitalization and Traded Value: Average daily market cap and average daily traded value (ADTV) over the previous 6 months on a rolling basis will be considered for the top 500 stocks.

• Median Quarter Sigma Order Size (MQSOS): The stock’s MQSOS over the last six months on a rolling basis shall not be less than Rs 75 lakh.

• Market Wide Position Limit (MWPL): The stock’s MWPL on a rolling basis shall not be less than 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 shall not be less than Rs 35 crore.

Conditions Under Product Success Framework (PSF)

• Trading Member Participation: At least 15% of trading members active in all stock derivatives or 200 trading members, whichever is lower, must have traded in any derivative contract on the stock being reviewed on a monthly average during the review period.

• Trading Days: The stock needs to be actively traded on at least 75% of the trading days in the derivatives segment throughout the review period.

• Turnover and Open Interest: The average daily turnover (futures + options premium) must be at least Rs 75 crore during the review period. The average daily notional open interest (futures + options notional) must be at least Rs 500 crore for the particular stock during the review period.

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