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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Legal and Regulatory Environment

Under SEBI's framework for eligibility of stocks for derivatives trading, which of the following is a feature of a stock that is eligible to have index or stock derivatives introduced on it?

A stock becomes eligible for derivatives only if it satisfies SEBI's criteria on liquidity, market capitalisation and related trading requirements. Illiquid, newly listed or trade-for-trade stocks do not qualify automatically, since the criteria aim to keep derivatives on stocks that are hard to manipulate.

  1. AIt must be traded only on the trade-for-trade segment
  2. BIt must be among the stocks that meet liquidity and market capitalisation criteria set by SEBICorrect
  3. CIt must have been listed for less than one month
  4. DIt must have no free-float shareholders

Explanation

Stocks are admitted to the derivatives segment only if they meet SEBI's criteria on market capitalisation, liquidity and trading, and related requirements. Newly listed stocks or those in trade-for-trade segment do not qualify by default.

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