Sebi on Friday revised the eligibility criteria of moving stocks in and out of the derivatives segment to ensure only the best stocks with strong market presence remain listed for trading.
For example, the new qualifying benchmarks for their inclusion in the derivatives segment would be linked to their performance in the cash segment during the last six months, to be checked on a rolling basis.
The revised criteria now require the MQSOS of a stock to be at least Rs 75 lakh against the earlier Rs 25 lakh. Besides, MWPL has been prescribed as Rs 1,500 crore from Rs 500 crore earlier in view of increase in market capitalisation. It has also revised the Average Daily Delivery Value in the cash market from Rs 10 crore to Rs 35 crore, after witnessing a stunning spurt in average daily delivery values.
Stocks that fulfill these criteria on any stock exchange's cash market would become qualified to trade in the equity derivatives segment across all exchanges.
Derivative contracts would be settled based on the VWAP calculated by the clearing corporations, which are derived from the cash market provided data across exchanges.
Sebi will also look at other parameters related to surveillance issues, investigations, and administrative matters for allowing a stock in the derivatives segment.
Stocks that fail to meet these fresh benchmarks for three consecutive months would be barred from the derivatives segment and no fresh contracts will be issued on such securities, though existing unexpired contracts would continue to be traded till expiry. A stock excluded from the derivatives segment cannot find a place again for at least a year.
Sebi said the revised qualifying criteria were a must have to ensure that only good-quality and sufficiently deep market stocks get allowed in the derivatives segment in view of the growth of the market after the last revision in 2018.
Further, Sebi has introduced a Product Success Framework or PSF for single-stock derivatives. Under this framework, at least 15% of its trading members active in all stock derivatives, or at least 200 trading members, must have traded any derivative contract on the stock under review, on average, each month during the review period. The stock should have also traded on at least 75% of the days during the review period, besides having an average daily turnover of at least Rs 75 crore-the futures and options premium combined-and Rs 500 crore as an average daily notional open interest-futures and options combined-in the review period.
Sebi said though derivative markets promote price discovery and liquidity, risks related to market manipulation and increased volatility, with reduced investor protection, might emanate from illiquidity or thin market or from inadequate position limits.
