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Informist, Friday, Aug 30, 2024

 

MUMBAI – The Securities and Exchange Board of India today revised with immediate effect the eligibility criteria for entry and exit of stocks in the equity derivatives segment to bring it line with the substantial rise in turnover and market capitalisation in the last 5-6 years. A key change in the inclusion criteria pertains to tripling a stock's median quarter sigma order size to a minimum of 7.5 mln rupees.

 

SEBI said this was due to the 3.5 times rise in underlying cash market turnover. A stock's median quarter sigma order size is size in value terms required to induce a change in the stock price equal to one-quarter of a standard deviation.

 

Further, due to a 2.8 times rise in total market capitalisation on the National Stock Exchange in the equity cash market in the last six years, SEBI has tripled the minimum market-wide position limit of a stock in the cash market to 15 bln rupees.

 

The market regulator also raised the criteria of average daily delivery value of a stock in the cash market, in the previous six months on a rolling basis, to a minimum of 350 mln rupees from 100 mln rupees. SEBI said the average daily delivery value in the cash market has shot up by 3.1 times since the last revision in 2018. SEBI did not change the entry criteria that a stock has to be among the top 500 stocks by market capitalisation.

 

SEBI also tweaked the exit norms for upcoming futures and options stocks which will apply six months after being in the list. A stock will exit if it does not meet any one of the four criteria for a continuous period of three months, on a rolling basis, based on the data for previous six months. For stocks currently in the permitted F&O trading list, the new criteria will apply three months from today.

 

SEBI has also introduced additional exit criteria based on product success framework for the stocks in F&O trading list. A stock will need to have a minimum average daily turnover, using premium turnover for options, of 750 mln rupees, while the average daily open interest should be a minimum of 5 bln rupees. The stock should be trading on a minimum 75% of trading days.

 

Further, at least 15% of trading members active in all stock derivatives, or 200 members, whichever is lower, would need to have traded in any derivative contract on the stock. If a stock doesn't meet the product success framework, no new derivatives contracts will be allowed in it.

 

SEBI said this was needed so that a stock not having sufficient liquidity, or not attracting sufficient trading interest from diverse market participants, doesn't continue to trade in the derivatives segment.  End

 

Reported by Rajesh Gajra

Edited by Ashish Shirke

 

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