SEBI tightens liquidity norms for derivative segment

Market regulator Sebi today 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.Now scrips with a minimum trading volume of Rs 1000000 and market wide position limit (MWPL) or market capitalisation of Rs 3000000000 would be eligible for entry into the Future and Options (Fand O) segment, Securities and Exchange Board of India (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 Fand O segment, experts said.Besides, it will enhance liquidity in the derivative segment, they added.Currently over 220 scrips trade in the Fand 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 Fand O segment and help curb manipulation," SMC Global Securities Strategist and 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 Rs 1000000, from Rs 500000 at present.Also the MWPL, indicating the size of the company, has been raised to Rs 3000000000, from Rs 1000000000.It further said scrips which fail to maintain a minimum MWPL requirement of Rs 2000000000 would cease to be in the Fand O segment. Earlier this limit was Rs 600000000.The scrip would exit the derivative segment if MQSOS falls below Rs 500000. Earlier this limit was Rs 200000, 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 Rs 1000000000 in the last three months."No fresh month contract shall be issued on stocks that may exit the Fand O segment," Sebi said while allowing the existing unexpired contracts to trade till expiry.