SEBI Revises Entry Criteria For Stocks In Derivatives Segment

The Securities and Exchange Board of India announced on Thursday new criteria for the inclusion of stocks in the derivatives segment. The market regulator now mandates that only the top 500 stocks by average daily market capitalisation and traded value in the past six months will be eligible for the derivatives market.

In addition, SEBI has set a minimum median quarter-sigma order size of Rs 75 lakh for stocks to qualify. This measure aims to ensure that only stocks with significant trading volume and market capitalisation are included, the market regulator said.

The market-wide position limit requirement has been raised to Rs 1,500 crore on a rolling basis. "The higher threshold for MWPL ensures that only stocks with substantial open interest are eligible, promoting market stability and preventing manipulation," SEBI said.

SEBI also introduced a criterion for the average daily delivery value in the cash market, which must now be at least Rs 35 crore over the last six months. This criterion ensures that stocks have sufficient trading activity in the cash market, supporting their liquidity in the derivatives segment, SEBI explained.

SEBI outlined new exit criteria for stocks in the derivatives segment. Stocks must have completed at least six months from their entry date before being eligible for exit evaluation. SEBI clarified that the exit criteria for existing stocks will be effective three months from the date of the circular.

Additionally, SEBI introduced the product success framework to monitor stocks' performance. The framework requires at least 15% of trading members or 200 trading members, whichever is lower, to trade in any derivative contract of the stock on a monthly basis. This ensures continuous market participation and liquidity, SEBI emphasised.

SEBI also mandated that stocks must trade on at least 75% of trading days during the review period to remain in the derivatives segment. This measure is intended to maintain active trading and liquidity.

The revised criteria specify that the average daily turnover for futures and options premiums must be at least Rs 75 crore during the review period.

Additionally, the average daily notional open interest for futures and options notional must be at least Rs 500 crore. This requirement guarantees that stocks have considerable open interest in the market, enhancing market efficiency, the regulator explained.