NSE Cancels Introduction of F&O contracts on Supreme Industries

NSE Cancels Introduction of F&O contracts on Supreme Industries

Indian Market
by 5paisa Research Team Last Updated: 2022-08-08T18:58:00+05:30

In its circular (Circular Ref. No: 94/2021) dated 30-November, the National Stock Exchange (NSE) had announced the introduction of futures and options contracts on 7 stocks with effect from 31-December corresponding to the Jan-22 contracts onwards. The list of 7 stocks to be introduced from 31-December were as under.
 

Security Name

Security Code

Balrampur Chini Mills Ltd

BALRAMCHIN

Gujarat Narmada Valley Fertilizers & Chemicals

GNFC

Hindustan Copper Ltd

HINDCOPPER

NBCC India Ltd

NBCC

Rain Industries Ltd

RAIN

Supreme Industries Ltd

SUPREMEIND

Tata Communications Ltd

TATACOMM

 

In all the above cases, the explicit condition as stated in the NSE circular dated 30-November was that their inclusion was subject to fulfilment of eligibility criteria of Quarter Sigma computation cycle of December 2021.
 

NSE decides to drop Supreme Industries from the F&O List


On 29-December, vide circular (Circular Ref. No: 107/2021), NSE has intimated its members that the F&O inclusion of Supreme Industries was withdrawn as the stock did not meet one of the eligibility criteria during the December period. Hence, the inclusion of Supreme Industries in F&O effective from 31-December stands cancelled. 

However, NSE has clarified that the other 6 companies in the above list (other than Supreme Industries) would be included in the F&O list effective from 31-December. The finer details about strike prices, lot size, quantity freeze limits etc will be communicated post trading on 30-December.

While the NSE circular has not specifically cited any specific reason, it has just said that the stock of Supreme Industries did not fulfil one of the criteria that would have made it eligible for inclusion in F&O trading.

Recap of the criteria for inclusion in F&O

SEBI has laid down elaborate criteria for introduction of stocks in derivatives segment. These can be summarized as under.

a) The stock for F&O will only be chosen from amongst the top 500 stocks in terms of average daily market capitalisation and average daily traded value. This will be evaluated for a period of 6 months on a rolling basis.

b) The stock’s median quarter sigma order size (MQSO) over last 6 months, on a rolling basis, must not be less than Rs.25 lakh. Median quarter sigma order size refers to the order value required to cause a change in the stock price equal to one-quarter of a standard deviation. This is a measure of the impact cost of the stock.

c) The market wide position limit (MWPL) of the stock must not be less than Rs.500 crore on a rolling basis. This refers to liquidity in terms of MWPL. This identifies whether the stock is a stock that can be cornered or whether the stock is widely held and traded so it cannot be influenced by a handful of traders.

d)  Average daily delivery value in the cash market should not be less than Rs.10 crore in the previous six months on a rolling basis.

e)  All the above criteria (a, b, c and d) must be fulfilled for a continuous period of 6 months.

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