SEBI Revamps Eligibility Criteria for Derivatives Segment Stocks

The Securities and Exchange Board of India (SEBI) has updated the eligibility criteria for stocks entering and exiting the derivatives segment. This ensures only high-quality stocks with sufficient market depth can trade. Revised criteria include increased financial thresholds and a new product success framework for single-stock derivatives.

Capital markets regulator SEBI announced on Friday significant revisions to the eligibility criteria for the entry and exit of stocks in the derivatives segment, aimed at ensuring that only high-quality stocks with adequate market depth are allowed to trade.

According to SEBI's new guidelines, eligible stocks must meet specific criteria based on their performance over the previous six months in the cash market, including a minimum Median Quarter Sigma Order Size (MQSOS) of Rs 75 lakh and a Market Wide Position Limit (MWPL) of Rs 1,500 crore.

Further stipulations include an Average Daily Delivery Value of Rs 35 crore. Stocks meeting these benchmarks will be allowed to trade in the derivatives segment across all stock exchanges. Additionally, SEBI introduced a Product Success Framework (PSF), necessitating active trading by at least 15% of trading members in the stock under review. Stocks failing to meet these criteria for three months will exit the segment, with no new contracts issued on such stocks.

In its circular, SEBI highlighted the necessity of robust eligibility criteria to mitigate risks of market manipulation, increased volatility, and compromised investor protection.

(With inputs from agencies.)