In a circular published on Friday, the regulator explained the reasons for the decision, saying that “the MQSOS criteria would have to be increased by 3-4 times.”
The regulator also revised the market position limit of a share (MWPL) for the preceding six months to Rs 1,500 crore from the current limit of Rs 500 crore. The change comes in the wake of the market capitalisation now standing at 2.8 times since the last revision.
Sebi has also mandated that the average daily delivery value (ADDV) of a stock in the spot market for the preceding six months on a continuous basis should not be less than Rs 35 crore. The current limit is Rs 10 crore. The ADDV has increased more than three times since the last revision.
Moreover, on maturity, unlike index derivatives which are cash settled, individual stock derivatives are physically settled. Sebi has not made any changes in the criteria relating to average daily market capitalisation and average daily traded value (ADTV) for the top 500 stocks. The circular said that stocks that meet the eligibility criteria laid down based on the performance of the underlying cash market over a rolling period of six months will be eligible to enter the derivatives segment. The eligibility criteria have been revised to ensure that only high-quality stocks with sufficient market depth are allowed to trade in the derivatives segment. With the kind of growth seen in the futures and options (F&O) markets, Sebi felt the need to change the criteria which were last revised in 2018.
The circular comes into force as of today.
Exit rules
If a stock in the derivatives segment fails to meet any of the above criteria for a continuous period of three consecutive months, based on data for the previous six months, it will be exited from the derivatives segment. In addition, no new contracts will be issued on stocks that may exit the derivatives segment.
However, existing unexpired contracts could continue to be traded until their expiration and new strikes could also be introduced in existing contract months, the circular said.
The exit criteria will only apply to those actions that have been in effect for at least 6 months since the date of introduction.
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