Monday September 2 2024

News Source: Global Exchanges

Focus: Derivative Market Segment

Type: General

Country: India

Link: https://tinyurl.com/nnzzeav8




On 30th August 2024, the Securities and Exchange Board of India (SEBI) issued a circular revising the eligibility criteria for entry/exit of stocks in derivatives segment.

Entry Norms – The stocks meeting the below stated eligibility criteria, based on performance of the underlying cash market, for a continuous period of six months, on a rolling basis, based on the data for previous 6 months, shall be eligible for entry into the derivatives segment.

S. No. Criteria Existing criteria Revised criteria Rationale for change
1. Average Daily Market Capitalization and Average Daily Traded value (ADTV) in the previous six months on a rolling basis Amongst top 500 stocks Amongst top 500 stocks No Change
2. The stock’s Median Quarter Sigma Order Size (MQSOS) over the previous six months, on a rolling basis, shall not be less than: INR 25 lakhs INR 75 lakhs Since average market turnover is now over 3.5 times the figure during the last review, MQSOS criteria would need to increase between 3-4 times.
3. The stock’s market wide position limit (MWPL), over the period of previous six months, on a rolling basis shall not be less than INR 500 crores INR 1,500 crores Market capitalisation is now 2.8 times the last review.
4. The stock’s Average daily delivery value (ADDV) in the cash market, in the previous six months on a rolling basis, shall not be less than INR 10 crores INR 35crores Average Daily Delivery Value has increased by over 3 times since the last review. Note that upon expiry, unlike index derivatives that are cash settled, single stock derivatives are physically settled.

Exit Norms – If a stock in derivatives segment fails to meet any of the criteria on this Circular for a continuous period of three months, on a rolling basis, based on the data for previous six months, then it shall exit from derivatives segment. No new contract shall be issued on stocks that may exit the derivatives segment. However, the existing unexpired contracts may be permitted to trade till expiry and new strikes may also be introduced in the existing contract months.

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