NISM-Series-VIII: Equity Derivatives · Trading Mechanism

Eligibility Criteria for Stocks and Indices in Derivatives

Updated 11 October 2026 · Fact-checked

Eligibility criteria are SEBI's tests for deciding which stocks and indices can have futures and options. A stock must rank among the top 500 by market capitalisation and traded value, and must meet minimum tests for order size, market-wide position limit and delivery value. An index needs enough eligible-stock weight.

Understand Eligibility Criteria for Stocks and Indices

Not every listed share can have futures and options. Thinly traded stocks are easy to push around. If derivatives existed on them, prices could be manipulated and positions would be hard to exit. SEBI therefore sets entry tests, and exchanges apply them.

For stocks, the tests look at three things: size, liquidity and room for positions. Size means the stock must rank in the top 500 by average daily market capitalisation and by average daily traded value over the previous six months, on a rolling basis. Liquidity means a minimum median quarter-sigma order size and a minimum median daily delivery value in the cash market, both measured over the previous six months. Room for positions means a minimum market-wide position limit (MWPL), which is the cap on total open positions in the stock across all participants.

The figures have been raised over time. SEBI's 2024 revision set the current figures: median quarter-sigma order size of at least ₹75 lakh, MWPL of at least ₹1,500 crore, and median daily delivery value of at least ₹35 crore. The earlier figures were ₹25 lakh, ₹500 crore and ₹10 crore. Always check which set your question or study material uses. The structure of the tests stays the same.

For indices, the focus is on the stocks inside the index. An index is eligible if its constituents that are eligible for derivatives have a cumulative weight of at least 80%, and only constituents with a weight of 0.5% or more are counted toward that 80%. An eligible stock with a weight below 0.5% does not disqualify the index. It simply adds nothing to the 80%. SEBI has also tightened rules for non-benchmark indices in recent years, such as requirements on number of constituents and concentration.

Eligibility is also tested after entry. If a stock fails the eligibility criteria for three consecutive months, no fresh month contracts are issued in it. Existing contracts continue, and further strikes can be added in them. Fresh contracts can be introduced once the stock again meets the criteria.

Key formulas to remember

Stock size test: Top 500 by average daily market capitalisation AND average daily traded value (previous 6 months, rolling); Both rankings count, not just one.
Order size test: Median quarter-sigma order size ≥ ₹75 lakh (current, SEBI's 2024 revision); ₹25 lakh (earlier figure); Measures how large an order moves the price by a quarter of a standard deviation. It is a liquidity test, taken as a median over the previous six months.
MWPL test: Market-wide position limit ≥ ₹1,500 crore (current, 2024 revision); ₹500 crore (earlier figure); Tests the room available for open positions in the stock.
Delivery value test: Median daily delivery value in cash market over the previous 6 months ≥ ₹35 crore (current, 2024 revision); ₹10 crore (earlier figure); A liquidity test on actual delivery-based trading in the cash market.
Index eligibility: Cumulative weight of constituents that are eligible for derivatives ≥ 80%, counting only constituents with weight ≥ 0.5%; One test with a counting rule. Eligible stocks below 0.5% are not counted toward the 80%, but they do not disqualify the index. Ineligible stocks add nothing to the 80%.
Continuation rule: Fails criteria for 3 consecutive months → no fresh month contracts; Existing contracts continue and further strikes can be added in them. Fresh contracts can be introduced once the stock again meets the criteria.

How to solve Eligibility Criteria for Stocks and Indices questions

Most questions ask for a number, a ranking basis, or whether a given stock or index qualifies. Use this method.

1Identify whether the question is about a stock or an index.
2For a stock, list the four tests: top 500 rank, order size, MWPL, delivery value.
3Note which set of figures the question uses. If options show ₹75 lakh, ₹1,500 crore and ₹35 crore, it is the current revised set; if ₹25 lakh, ₹500 crore and ₹10 crore, it is the earlier set.
4Check every test. One failure means the stock is not eligible.
5For an index, add up the weight of only those constituents that are eligible for derivatives and have a weight of at least 0.5%. The total must be at least 80%.
6For a continuation question, count months. Three consecutive months of failure stops fresh month contracts. Existing contracts continue, further strikes can be added, and fresh contracts can come back once the stock again meets the criteria.
7Match the answer to the option with the exact figure and unit (lakh versus crore).

Quickest way: Memorise the 500 / ₹75 lakh / ₹1,500 crore / ₹35 crore and 80 / 0.5 pattern

When to use it: Use it for direct recall MCQs where the options are numbers.

Stock: top 500, then three money tests: order size ₹75 lakh, MWPL ₹1,500 crore, median daily delivery value ₹35 crore (current set).
Earlier set, if the question uses it: ₹25 lakh, ₹500 crore and ₹10 crore.
Check units. Order size is in lakh. MWPL and delivery value are in crore.
Index: eligible constituents must add up to at least 80% weight, and only those with weight of at least 0.5% are counted.
If two options differ only by earlier versus revised figures, pick the set that matches the other figures in the question.

Common mistakes in Eligibility Criteria for Stocks and Indices

Mixing up lakh and crore between the order size test and the MWPL test
All three figures look like small round numbers and are learned together.
Fix: Remember order size is in lakh, while MWPL and delivery value are in crore.
Treating the 0.5% rule as a requirement that every eligible stock must meet, or counting all eligible stocks toward the 80%
Students merge the 80% rule and the 0.5% rule into two separate pass-fail tests.
Fix: There is one 80% test. Only eligible constituents with weight of at least 0.5% count toward it. An eligible stock below 0.5% is not a failure. It is just left out of the total. Ineligible stocks add nothing.
Saying existing contracts are cancelled when a stock fails the criteria
The word 'discontinued' sounds immediate.
Fix: Only fresh month contracts stop. Existing contracts continue, further strikes can be added, and fresh contracts can be introduced once the stock again meets the criteria.
Using only market capitalisation for the top 500 test
Size is the obvious measure.
Fix: Both average daily market capitalisation and average daily traded value count.
Mixing earlier and revised threshold figures in one answer
Different study sources show different versions.
Fix: Pick one consistent set. Use the options to see which set the question follows.

Worked examples

Example 1

Which of the following is a requirement for a stock to be eligible for derivatives trading, under the current (2024 revised) SEBI criteria? (a) Median daily delivery value of at least ₹35 crore over the previous six months (b) Presence in the top 50 stocks by market capitalisation (c) Median daily delivery value of at least ₹350 crore (d) MWPL of at least ₹150 crore

Show the solution

The stock must be in the top 500, not the top 50, so option (b) is wrong.
MWPL must be at least ₹1,500 crore, not ₹150 crore, so option (d) is wrong.
Median daily delivery value must be at least ₹35 crore, not ₹350 crore, so option (c) is wrong.
Option (a) matches the delivery value test.

Answer: (a)

Example 2

Constituents of an index that are eligible for derivatives have a total weight of 83%. Among them, the eligible stocks each weighing below 0.5% add up to 4%. Is the index eligible for derivatives under the 80% and 0.5% tests?

Show the solution

Only eligible constituents with a weight of at least 0.5% are counted toward the 80%.
Eligible stocks below 0.5% add up to 4%, so they are left out of the count.
Counted weight = 83% − 4% = 79%.
79% is less than 80%, so the test is not met.
The 83% headline figure is the trap. The eligible stocks below 0.5% do not disqualify the index by themselves. They just do not count.

Answer: Not eligible. Only 79% of the weight is counted, which is below 80%.

Exam tips

Learn the figures with their units. Wrong-unit options are the favourite trap.
Expect questions that ask for the ranking basis (top 500) or the test names, not just the numbers.
For index questions, count only eligible constituents with weight of at least 0.5% and check that their total is at least 80%.
If options show both earlier and revised figures, read the whole question for hints about which version it uses, then stay consistent.
On negative-marked papers, skip a figure-based question only if you cannot narrow it down. Unit errors can usually be eliminated.

Practice questions from Trading Mechanism

Eligibility Criteria for Stocks and Indices: frequently asked questions

How are stocks selected for futures and options trading?

The exchange checks SEBI's criteria. The stock must be in the top 500 by market capitalisation and traded value, and must meet minimum tests for order size, market-wide position limit and delivery value. If a stock fails for three consecutive months, no fresh month contracts are issued in it.

What is the criterion for introducing derivatives on an index?

The constituents of the index that are eligible for derivatives must have a cumulative weight of at least 80%. Only constituents with a weight of 0.5% or more are counted toward this 80%. SEBI has also added rules for non-benchmark indices in recent years.

Have the F&O eligibility figures changed?

Yes. SEBI's 2024 revision raised the order size, MWPL and delivery value thresholds. The current figures are ₹75 lakh, ₹1,500 crore and ₹35 crore. The earlier figures were ₹25 lakh, ₹500 crore and ₹10 crore. Check which version your question or study material uses.

What happens when a stock no longer meets the criteria?

If it fails the eligibility criteria for three consecutive months, no fresh month contracts are issued in it. Existing contracts continue, and further strikes can be added in them. Fresh contracts can be introduced once the stock again meets the criteria.