The regulator wants shares in the derivatives market to be more liquid and traded by a broad set of market participants to prevent manipulation and reduce risks to the system.
“Given the need to ensure that only high-quality stocks with sufficient market depth are allowed to be traded, derivatives segment and considering the growth observed in market parameters since the last review carried out in 2018, the eligibility criteria for entrance and exit “The volume of shares in the derivatives segment has been revised,” Sebi said in a circular on Friday.
The regulator has increased the average quarter-sigma order size (MQSOS), a key parameter for inclusion of stocks in F&O, over the preceding six months continuously by three times to ₹75 lakh from the current ₹25 lakh, citing that the market average turnover is now more than 3.5 times the figure during the last review. The MQSOS criteria would have to be increased by 3-4 times, Sebi said.
It also revised the market position limit of a share (MWPL) for the previous six months to ₹1,500 crore from the current limit of ₹500 crore. The change comes as the market capitalisation now stands at 2.8 times since the last revision.
The regulator also said the average daily delivery value (ADDV) of a stock in the cash market for the preceding six months on a continuous basis should not be less than ₹35 crore. The current criterion is ₹10 crore. Stocks that meet the eligibility criteria in the underlying cash market of any stock exchange would be allowed to trade in the equity derivatives segment of all stock exchanges. Stock exchanges would be required to settle derivative contracts at a price calculated by clearing corporations based on the volume weighted average price (VWAP) of the cash segment across all exchanges, Sebi said. The regulator said Sebi would take into account any concerns about vigilance, ongoing investigations or other administrative considerations while considering the introduction of a stock in the derivatives segment.
If a stock in the derivatives segment fails to meet any of these criteria for a continuous period of three months, on a continuous basis, based on the data of the preceding six months, then it shall be exited from the derivatives segment. No fresh contract shall be issued on stocks that may be exited from the derivatives segment, Sebi said.
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