The Securities and Exchange Board of India (Sebi) has said it is reviewing the eligibility criteria of stocks in the derivatives segment.

Derivatives contracts on stocks can be traded on the bourses only if the underlying shares satisfy certain objective criteria. The market regulator said in its annual report that the last review of the eligibility criteria for the introduction of stocks in derivatives was done in 2018.

“Since then, broad market parameters reflecting the size and liquidity of the cash market, viz, market capitalisation and turnover have moved up considerably. It is proposed to review the eligibility criteria for the introduction and continuation of stocks in the derivatives segment,’’ it said.

The eligibility criteria for the inclusion of stocks in F&O (major types of derivatives) take into consideration factors such as average daily market capitalisation, average daily traded value, the market wide position limit in the security and the average daily deliverable value.

Among them, the average daily market capitalisation and the average daily traded value would be computed on the 16th of each month on a rolling basis to arrive at the list of top 500 securities.

Sebi further added that it is in the process of strengthening the existing framework of price band for shares that are part of the F&O segment for more effective risk management and orderly trading.

F&O shares do not have fixed circuit limits, but have a dynamic circuit limit of 10 per cent. If the price reaches that limit, the levels are relaxed but after a cooling period of 15 minutes. Sebi disclosed that it had carried out a study to analyse the trading by individual investors with regard to profit or loss incurred by them in the equity F&O segment.