Key Points
The last review of the eligibility criteria for introduction of stocks in the derivatives segment was conducted in 2018, the SEBI paper said.. Adding, Since then, market parameters reflecting the size and liquidity of the cash market, viz., market capitalisation and turnover, have moved up considerably...
In its paper, SEBI said that without tightening its norms and ensuring only high-quality stocks make it to the F&O category,there can be higher risks of market manipulation, increased volatility, and compromised investor protection...
Anew investor, not familiar with how options work and is familiar with a particular stock in the conventional stock market, will want to take a position on this stock in the futures or options market as well,James said.But, because of the low volumes in this stock in the F&O segment, therewontbe enough bids...
Given all this, there is a need for SEBI to ensure that only high-quality stocks in terms of size, liquidity, and market depth are available in the derivatives segment,the SEBI paper said.In line with this, the extant market parameters for eligibility in the derivatives segment need to be readjusted to keep pace with the evolving market conditions...
Overall, James said, these changes are positive and welcome since they will strengthen the F&O market.What it will do is leave only the highly active and stronger F&O stocks, which is a positive for the market, as well as for traders...
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