Market regulator Sebi has tightened the criteria for stocks to be traded in the futures and options segment by raising the minimum requirement of median quarter-sigma order size (MQSOS) - an indicator of market depth - for a stock to Rs 10 lakh from Rs 5 lakh. Sebi has also trebled the minimum market-wide position limit (MWPL) - which measures participation in a stock derivative - to Rs 300 crore for stocks to be introduced in the segment. 

This will exclude several thinly-traded stock futures and restrict the entry of illiquid stocks into the derivatives segment. 

Sebi also tightened the minimum conditions for a stock to continue trading in the derivatives segment. The regulator said a stock's MQSOS over the last six months should be more than Rs 5 lakh against Rs 2 lakh earlier. For stocks to remain in the derivatives segment, they will now need to retain a minimum MWPL of 200 crore compared with the existing Rs 60 crore. 

"Many stock futures are either inactive or are being traded by select groups of traders. The new rules will remove such contracts from the market," said Siddarth Bhamre, head - equity derivatives at Angel Broking. 

"Liquidity from such contracts will also shift to more liquid contracts and help improve overall price discovery in the market." 

Sebi has also said that each stock derivative should have a minimum average monthly turnover of Rs 100 crore in the three trailing months to remain in the derivatives segment. (Economic Times)