SEBI/HO/MRD/MRD - PoD - 2/P/CIR/2024/116 — THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992

CIRCULAR SEBI/HO/MRD/MRD - PoD - 2/P/CIR/2024/116 August 30, 2024 To All Recognized Stock Exchanges Sir/Madam, Subject: Review of eligibility criteria for entry/exit of stocks in derivatives segment. 1. Background 1.1.Derivative markets enhance price discovery and market liquidity. However, without sufficient depth in the underlying cash market, sufficient volumes in derivatives markets, and appropriate position limits around leveraged derivatives, there can be higher risks of market manipulation, increased volatility, and compromised investor protection. 1.2.To help develop the securities market while being mindful of these concerns, SEBI vide section 3.1.2 of Chapter 5 of Master Circular on Stock Exchanges and Clearing Corporations, dated October 16, 2023 , has, inter-alia, laid down the eligibility criteria for entry/exit of stocks in derivatives segment. 1.3.Given the need to ensure that only high quality stocks with sufficient market depth are allowed to trade in derivatives segment and considering the growth witnessed in market parameters since the last review conducted in 2018, the eligibility criteria for entry/exit of stocks in derivatives segment has been revised as under . 2. Entry Norms for stocks in derivatives segment 2.1.The stocks meeting the below stated eligibility criteria, based on performance of the underlying cash market, for a continuous period of six months, on a rolling basis, based on the data for previous 6 months, shall be eligible for entry into the derivatives segment. Table -1 2.2.Stocks which meet the eligibility criteria in the underlying cash market of any stock exchange would be permitted to trade in equity derivatives segment of all stock exchanges. The stock exchanges shall settle the derivative contracts at a price calculated by the