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SEBI tightens liquidity norms for derivative segment

Shares with a minimum trading volume of Rs10 lakh and market wide position limit or market capitalisation of Rs300 crore would be eligible for entry into the Future and Options segment


New Delhi: Market regulator Securities and Exchange Board of India (SEBI) has hiked the benchmark liquidity level for any scrip to be eligible for trading in the derivatives segments, a move aimed at checking any manipulation by doing away with illiquid stocks, reports PTI.

Now scrips with a minimum trading volume of Rs10 lakh and market wide position limit (MWPL) or market capitalisation of Rs300 crore would be eligible for entry into the Future and Options (F&O) segment, SEBI said in a circular.

"In order to improve market integrity, it has been decided, in consultation with Stock Exchanges, to tighten the eligibility and exit criteria for stocks in derivatives segment," SEBI said.

The move is likely to help curb any manipulation in share prices and bring in more meaningfulness to the F&O segment, experts said. Besides, it will enhance liquidity in the derivative segment, they added.

Currently over 220 scrips trade in the F&O segment in the National Stock Exchange. Of these, only around 100 scrips are likely to meet the new eligibility criteria set by SEBI, experts said.

"Through this move SEBI wants to ensure that only relevant stocks with good amount of liquidity is able to trade in the F&O segment and help curb manipulation," SMC Global Securities Strategist & Head of Research Jagannadham Thunuguntla said.

SEBI said the minimum Median Quarter Sigma Order Size (MQSOS), which indicate liquidity or order size in a scrip, requirement for introduction in derivatives segment has been revised to Rs10 lakh, from Rs5 lakh at present.

Also the MWPL, indicating the size of the company, has been raised to Rs300 crore, from Rs100 crore.

It further said scrips which fail to maintain a minimum MWPL requirement of Rs200 crore would cease to be in the F&O segment. Earlier this limit was Rs60 crore.

The scrip would exit the derivative segment if MQSOS falls below Rs5 lakh. Earlier this limit was Rs2 lakh, SEBI said.

Further to assess the trading depth of a scrip in the derivatives segment, SEBI said the trading stock derivatives should have an average monthly turnover of Rs100 crore in the last three months.

"No fresh month contract shall be issued on stocks that may exit the F&O segment," SEBI said while allowing the existing unexpired contracts to trade till expiry.



R Balakrishnan

4 years ago

The absolutely low limit set shows how narrow and shallow our stock markets are. Could the market cap not have been kept above a decent size, say, Rs.10,000 crores? And a ten lakh daily volume? Not even matches the volume that a HNI would deal with in a stock. We are pretending to be a financially developed nation, using toy soldiers for a war

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