SEBI Extends Timeline for Derivatives Eligibility on Non-Benchmark Indices

Circular No. HO/47/15/11(1)2025-MRD-TPD1, Dated: 30.10.2025

1. Background

The Securities and Exchange Board of India (SEBI) has announced a revision in the implementation timelines for the eligibility criteria applicable to derivatives trading on existing Non-Benchmark Indices.

This step has been taken to ensure orderly transition and compliance by Stock Exchanges while maintaining market stability and investor protection during the adjustment process.

2. Objective of the Revision

SEBI’s revised timeline seeks to:

• Facilitate phased realignment of index constituents and weights,
• Ensure compliance with the revised eligibility and prudential norms, and
• Allow Stock Exchanges sufficient time to complete the adjustments in indices used for derivative contracts.

The move follows SEBI’s broader initiative to strengthen the framework for equity derivatives, ensuring that underlying indices meet minimum liquidity and market-capitalisation thresholds.

3. Compliance and Prudential Requirements

The revised framework requires Stock Exchanges to ensure that:

• All index constituents meet minimum market capitalisation and liquidity criteria;
• The weight of individual securities within the index is aligned with SEBI’s prescribed prudential limits; and
• Derivative contracts on such indices continue only after full compliance with the revised eligibility norms.

This ensures that Non-Benchmark Index derivatives remain robust, representative, and backed by sufficiently liquid underlying securities.

4. Expected Impact

The revised implementation schedule is expected to:

• Provide operational flexibility to Stock Exchanges,
• Prevent abrupt market adjustments or liquidity shocks,
• Improve the risk management framework in derivative markets, and
• Enhance investor confidence by reinforcing transparency and regulatory discipline.

5. Conclusion

By extending the implementation timelines—up to December 31, 2025 for BANKEX and FINNIFTY and March 31, 2026 for BANKNIFTY—SEBI has taken a balanced approach that combines regulatory prudence with market continuity.

This phased alignment will ensure that derivatives on Non-Benchmark Indices remain compliant, liquid, and resilient, in line with SEBI’s evolving standards for equity derivative markets.

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