The National Stock Exchange (NSE) is expanding its derivatives playground. Beginning June 27, four more stocks are expected to be available for trading in the Futures & Options (F&O) segment. This includes 360 One Wam, Amber Enterprises India, KFin Technologies, and PG Electroplast.
These additions are subject to final eligibility clearances based on a set of calculations called the quarter sigma computation cycle.
The inclusion of these four stocks means new avenues for hedging risks and speculative trading all without the need to actually own the shares.
Currently, around 200 securities are available in NSE’s derivatives segment.
What makes a stock F&O-worthy?
The NSE does not just pick stocks on a whim. It follows strict guidelines laid down by the market regulator, SEBI (Securities and Exchange Board of India).
Moreover, it is key to note that only the top 500 companies by market capitalisation are considered.
Let’s take a look at what SEBI notes at-
Liquidity: This is measured through a metric called the median quarter sigma order size. Furthermore, it helps filter out illiquid or easily manipulated stocks.
In August 2024, SEBI raised this benchmark from Rs 25 lakh to Rs 75 lakh.
Market-wide position limit: This was also increased from Rs 500 crore to Rs 1,500 crore.
Average daily delivery value: Raised from Rs 10 crore to Rs 35 crore. This checks whether the stock sees enough buying and selling in the cash market.
Furthermore, it is important to note that stocks are not guaranteed a permanent seat at the F&O table. If a stock fails to meet these criteria for three consecutive months, it gets the boot. However, contracts that have already been initiated will be allowed to run their course until expiry.
While the official trading in these contracts begins June 27, the finer details such as market lot size and strike price scheme will be shared by NSE on June 26 via a separate circular.
What these companies bring –
360 One Wam: It is a leading name in wealth management.
Amber Enterprises India: This company is known for manufacturing air conditioners and components.
KFin Technologies: It provides tech-driven financial services like registrar and transfer agent solutions.
PG Electroplast: The company specialises in plastic moulding and contract manufacturing for electronics.