SEBI Updates Derivatives Entry/Exit Criteria, Increases Key Financial Thresholds

Circular No. SEBI/HO/MRD/MRD-PoD-2/P/CIR/2024/116; Dated: 30.08.2024

Earlier, SEBI vide Master Circular dated October 16, 2023, laid down the eligibility criteria for entry/exit of stocks in the derivatives segment. SEBI has now revised the eligibility criteria. As per the revised norms, SEBI has raised the stock’s median quarter sigma order size (MQSOS) over the previous 6 months on a rolling basis from Rs 25 lakhs to Rs 75 lakhs.

Further, SEBI has raised a stock’s market-wide position limit (MWPL) over the period of the previous 6 months on a rolling basis to Rs 1,500 crores from the existing limit of Rs 500 crores. The stock’s average daily delivery value (ADDV) in the cash market over the previous 6 months on a rolling basis must not be less than Rs 35 crores. The existing limit is Rs 10 crores. Moreover, upon expiry, unlike index derivatives that are cash-settled, single-stock derivatives are physically settled.

Stocks that meet the eligibility criteria in the underlying cash market of any stock exchange would be permitted to trade in the equity derivatives segment of all stock exchanges. The stock exchanges must settle the derivative contracts at a price calculated by the clearing corporations based on volume-weighted average price (VWAP) from the cash segment across all exchanges.

In addition, the SEBI must take into account other aspects, such as any surveillance concerns, ongoing investigations, or other administrative considerations, when considering a stock for introduction into the derivatives segment. Also, SEBI has made no changes in the criteria related to the Average Daily Market Capitalisation and Average Daily Traded Value (ADTV) for the top 500 stocks.

Click Here To Read The Full Circular