![The new proposal seeks to remove stocks with persistently low trading volumes from the Futures & Options (F&O) segment of the stock exchange. The new proposal seeks to remove stocks with persistently low trading volumes from the Futures & Options (F&O) segment of the stock exchange.](https://images.news18.com/ibnlive/uploads/2021/07/1627283897_news18_logo-1200x800.jpg?impolicy=website&width=510&height=383)
The new proposal seeks to remove stocks with persistently low turnover from the Futures & Options (F&O) segment of the stock exchange.
Under the proposal, individual stocks would have to be traded for 75% of the trading day to be included in derivatives trading.
Capital markets regulator Sebi on Monday proposed stricter norms for entry of individual stocks into the derivatives sector.
The new proposal seeks to remove stocks with persistently low trading volumes from the Futures & Options (F&O) segment of the stock exchange.
“Insufficient depth in the underlying cash markets and lack of appropriate position limits for leveraged derivatives may result in heightened risk of market manipulation, increased volatility and compromised investor protection,” Sebi said in an advisory note.
Considering all this, Sebi needs to ensure that only high quality stocks in terms of size, liquidity and market depth are available in the derivatives segment.
Accordingly, the existing market parameters for eligibility in the derivatives sector need to be readjusted to keep pace with the evolving market conditions, it added.
This review was proposed in consideration of the remarkable growth of market variables that reflect the size and liquidity of the cash market, such as market capitalization and sales. The last review of the eligibility criteria for the introduction of shares in the derivatives sector was conducted in 2018.
Under the proposal, individual stocks would have to be traded for 75% of the trading day to be included in derivatives trading.
Additionally, at least 15% of active traders or 200 members, whichever is lower, must trade the stock, average daily turnover must be between Rs 500 crore and Rs 1,500 crore, and average premium daily turnover must be at least Rs 150 crore. For inclusion.
Sebi also proposed that the maximum number of open contracts allowed for the underlying shares should be Rs 1,250 crore and Rs 1,750 crore. Currently, that figure is pegged at Rs 500 crore.
These offers aim to ensure sufficient turnover of shares, public interest and broad participation.
Sebi said stocks should continue to be selected from among the top 500 stocks in terms of average daily market capitalization and average daily traded value.
The median quarter-sigma order size for the stock in the last six months should be between Rs 75 and Rs 100 lakh. This figure has now increased by 3-4 times from at least Rs 25 lakh.
The minimum moving average daily delivery amount of the stock in the cash market in the last six months should be Rs 30-40 crore. Currently, this amount is 1 billion won.
If a stock fails to meet the criteria for three consecutive months, it must be taken out of the derivatives segment. This means that no new contracts will be issued for those shares.
The Securities and Exchange Board of India (Sebi) has sought public comments on the proposal till June 19.
(This story has not been edited by News18 staff and is published from a syndicated news agency feed – PTI)