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GOVERNMENT OF INDIA Ministry of Finance (DEPARTMENT OF ECONOMIC AFFAIRS)
RAJYA SABHA STARRED QUESTION NO. *170 TO BE ANSWERED ON THURSDAY, AUGUST 23, 2012 / BHADRA 1, 1934 (SAKA) Sebi Guidelines for futures and Options (F&O) Segment
*170. SHRI RAJEEV CHANDRASEKHAR
Will the Minister of FINANCE be pleased to state:
(a) whether Securities and Exchange Board of India (SEBI) has changed eligibility criteria for choosing stocks that would be eligible for the Futures and Options (F&O) segment;
(b) whether several dubious operator-driven stocks, which had been added by National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) to the F&O segment, in order to boost their volumes, have crashed in response to SEBI's decision to change the norms;
(c) if so, whether any enquiry has been conducted with regard to dubious and poor quality stocks being added to F&O portfolio by NSE/BSE; and
(d) if so, the details thereof, and if not, the reasons therefor?
ANSWER MINISTER OF THE MINISTRY OF FINANCE (SHRI P. CHIDAMBARAM)
(a) to (d): A statement is placed on the table of the House.Statement referred to in reply to Parts (a) to (d) of the Rajya Sabha Question No. * 170 by Shri Rajeev Chandrasekhar regarding SEBI guidelines for Futures and Options (F&O) segment due for answer on 23.08.2012
(a) Yes, Sir. Securities and Exchange Board of India (SEBI), the market regulator for exchange traded derivatives, revised the eligibility criteria for stocks in the equity Futures and Options (F&O) segment vide, circular dated July 23, 2012. Vide this circular, SEBI introduced more onerous conditions for stocks to be eligible to be included in the F&O Segment. They have done so by increasing the minimum threshold values of Market-wide Position Limits (MWPL), Median
Quarter Sigma Order Size (MQSOS) and by introducing an additional criteria of average monthly
turnover in F&O segment. These criteria have been introduced to ensure that only those stocks which have adequate liquidity are included in the F&O Segment.
(b) to (d): Exchanges carry out periodic analysis to decide on the stocks to be included in or removed from the F&O segment. Exchanges can, however, remove stocks on their own but for adding new stocks they are required to take prior approval of SEBI. Pursuant to revision of the aforesaid norms by SEBI, NSE vide its circular dated July 24, 2012 notified the removal of 51 stocks from F&O segment. Similarly, BSE vide its circular dated July 25, 2012 notified the removal of 52 stocks from its F&O segment. Out of the above stocks, 51 are common to both BSE and NSE. Orders by SEBI changing conditions for inclusion and exclusion of stocks from the F&O segment are not a rarity. They do so on the basis of the feedback they receive from the market and on the analysis of the performance of stocks in the F&O segment and such changes may not be a response to any unusual movement of stock prices. In the present instance, the average decline in the 52 stocks after their exclusion was announced (July 23, 2012) and till August 13, 2012, was only around 0.5%, which cannot be termed as a 'crash' warranting an enquiry.