SEBI Issues Consultation Paper On Derivatives Eligibility

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  • Last Updated on 20 August, 2025

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SEBI Derivatives Eligibility 2025

Consultation Paper; Dated: 18.08.2025

SEBI Issues Consultation Paper on Derivatives Eligibility

The Securities and Exchange Board of India (SEBI) has released a consultation paper on the implementation of eligibility criteria for introducing derivatives on non-benchmark indices. This follows SEBI’s earlier circular dated 29 May 2025, which laid down prudential requirements to ensure that only liquid, broad-based, and well-diversified indices are permitted for derivatives trading.

Prudential Norms for Non-Benchmark Indices

As per the circular, indices must meet certain conditions to qualify for derivatives. These include having a minimum of 14 constituent stocks, a maximum weight cap of 20% for the top constituent, and a combined weight cap of 45% for the top three constituents. Additionally, the index must follow a descending weight structure for the remaining constituents to avoid concentration risks and ensure adequate diversification.

Proposals by Stock Exchanges

In response to SEBI’s framework, stock exchanges have suggested permitting weight adjustments in existing indices so that they can comply with the prescribed norms. This approach would enable indices that are already in use to continue supporting derivative contracts, while also aligning them with the prudential safeguards mandated by SEBI.

Next Steps and Industry Feedback

The consultation paper seeks feedback from stakeholders on the proposed implementation measures and the feasibility of index rebalancing. Based on the comments received, SEBI will finalize the approach to operationalize these criteria. The move is expected to bring greater transparency, investor protection, and market stability in the derivatives segment linked to non-benchmark indices.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied