What Are the New Rules for Derivatives Trading in Individual Stocks

1. What Are the New Rules For Derivatives Trading in Individual Stocks

2. About us • The Indian derivatives market has seen massive growth in recent years. From institutional investors to active retail traders, participation in futures and options (F&O) has surged to unprecedented levels. While this growth highlights financial market maturity, it also brings concerns about excessive speculation and liquidity concentration in certain stocks. To address these challenges, the Securities and Exchange Board of India (SEBI) has recently revised the Rules for Derivatives Trading in Individual Stocks to ensure better market stability, investor protection, and sustainable participation.

3. Why SEBI Revised the Rules SEBI, India’s capital market regulator, periodically reviews the derivatives segment to maintain healthy market functioning. Over time, single-stock derivatives became highly concentrated in a few counters, with a majority of speculative volumes disconnected from underlying fundamentals. This raised systemic concerns, prompting SEBI to issue a review of eligibility criteria for stock derivatives in late 2024. • The new rules for derivatives trading in individual stocks are designed to • Enhance liquidity in F&O contracts. • Ensure underlying stock activity supports derivative exposure. • Limit inclusion of illiquid or small-cap stocks. • Improve market integrity and investor confidence.

4. INDIVIDUAL STOCK DERIVATIVES • Individual stock derivatives are futures and options contracts written on specific company shares. For example, Reliance Industries Futures or Infosys Options allow traders to take leveraged positions on the price movement of these individual stocks without owning the shares directly.

5. 01 02 03 THE CORE OF THE NEW FRAMEWORK • The new rules for derivatives trading in individual stocks revolve around three pillars — eligibility, liquidity, and continuity. Each aims to ensure that only actively traded, fundamentally supported stocks are allowed in the F&O segment. Revised Entry Criteria • To qualify for derivative trading, a stock must now satisfy stricter quantitative conditions related to liquidity, trading volume, and investor participation. Continuation Criteria • Even after inclusion, a stock must continue to meet these benchmarks to remain eligible. Stocks falling short of liquidity or MWPL requirements during periodic reviews can be phased out of the derivatives list. Data-Driven Precision: • Our campaigns are backed by analytics and data-driven insights. By constantly monitoring performance metrics, we fine-tune strategies in real-time, ensuring optimal results.

6. THANK YOU FOR YOUR ATTENTION customercare@laresalgotech.com laresalgotech.com