Sebi notifies F&O settlement rules

Mumbai: Market regulator Sebi on Wednesday notified the revised framework for stock derivatives trading under which the stocks that fails to meet the enhanced eligibility criteria will be moved from cash settlement to physical settlement. 

The move is part of Sebi’s broader plan to completely move towards the physical settlement of stock derivative contracts, which according to it is necessary to curb high amount of speculation in the markets. 

It has directed stock exchanges to put in place proper system and procedures for the smooth implementation of the physical settlement.  

According to the revised framework, the stock to be made part of the derivative segment should be among the top 500 stocks in terms of average daily market capitalisation and average daily traded value in the previous six months on a rolling basis.  

The market wide position limit in the stock should not be less than Rs 500 crore on a rolling basis and the average daily delivery value in the cash market should not be less than Rs 10 crore in the previous six months. 

“Derivatives on stocks (new/existing), which meet the enhanced eligibility criteria shall be cash settled until further notification, however such stocks, if they fail to satisfy any of the enhanced eligibility criteria for a continuous period of three months, shall move from cash settlement to physical settlement,” the circular said. 

After moving to physical settlement, if such stocks do not meet any of the eligibility criteria for a continuous period of three months, Sebi said such stocks would be removed from the derivative segment.