Summary: On August 30, 2024, SEBI issued a circular revising the eligibility criteria for the entry and exit of stocks in the derivatives segment. The new guidelines significantly raise the thresholds for key metrics such as Median Quarter Sigma Order Size (MQSOS), Market Wide Position Limit (MWPL), and Average Daily Delivery Value (ADDV). To qualify for entry, stocks must meet a revised MQSOS of INR 75 lakhs, MWPL of INR 1500 crores, and ADDV of INR 35 crores, each measured over a rolling six-month period. Exit norms have also been tightened; stocks failing to meet these criteria for three consecutive months will be excluded from the derivatives segment and barred from re-entry for one year. Additionally, SEBI introduced a Product Success Framework (PSF) requiring a minimum level of trading activity, turnover, and open interest for stocks to remain in the derivatives market. These updates aim to enhance market stability by ensuring only actively traded and financially robust stocks participate in the derivatives segment.
Circular Number SEBI/HO/MRD/MRD-PoD-2/P/CIR/2024/116 dt 30th August 2024
Entry Norms for stocks in derivatives segment
The stocks meeting the below stated eligibility criteria, based on performance of the underlying cash market, for a continuous period of six months, on a rolling basis, based on the data for previous 6 months, shall be eligible for entry into the derivatives segment.
Criteria 1 : The stock’s Median Quarter Sigma Order Size (MQSOS) over the previous six months, on a rolling basis, shall not be less than:
Existing: INR 25 lakhs
Revised: INR 75 lakhs
Criteria 2 : The stock’s market wide position limit (MWPL), over the period of previous six months, on a rolling basis shall not be less than:
Existing: INR 500 crores
Revised: INR 1500 crores
Criteria 3 : The stock’s Average daily delivery value (ADDV) in the cash market, in the previous six months on a rolling basis, shall not be less than:
Existing: INR 10 crores
Revised: INR 35 crores
Exit norms based on performance in underlying cash market
If a stock in derivatives segment fails to meet any of the above criteria, as mentioned at Table-1 above, for a continuous period of three months, on a rolling basis, based on the data for previous six months, then it shall exit from derivatives segment.
The abovementioned criteria for exit shall apply to only those stocks which have completed at-least 6 months from the date of introduction
Additionally, for existing stocks in the derivatives segment, there would be a gestation period of 3 months before applicability of the said exit criteria
A stock will exit from derivatives segment if it fails in meeting eligibility criteria across all exchanges based on performance in the underlying cash market
Once a stock is excluded from the derivatives segment, it shall not be considered for re-inclusion for a period of one year from its last trading day in the derivatives segment.
Exit norms based on introduction of a Product Success Framework (PSF) for stock derivatives:
1. At least 15% of trading members active in all stock derivatives (trading member who has traded during the month) or 200 trading members, whichever is lower, shall have traded in any derivative contract on the stock being reviewed on an average on monthly basis during the review period,
2. Trading on a minimum of 75% of the trading days during the review period,
3. Average daily turnover (futures + options premium) of at least INR 75 crores during the review period, and
4. Average daily notional open interest (futures + options notional) of at least INR 500 crores during the review period.
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