Implementation of eligibility criteria for derivatives on existing Non-Benchmark Indices

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.....7.1 In addition to the existing eligibility criteria for derivatives on indices, specified in Clause 1.1.2 of Chapter 5 of SEBI Master Circular for Stock Exchanges and Clearing Corporations dated December 30, 2024, Stock Exchanges shall follow the following prudential norms before introducing derivatives on non-benchmark indices: 5.7.1.1 Minimum of 14 constituents; 5.7.1.2 Top constituent's weight ≤ 20% 5.7.1.3 Combined weight of the top three constituents ≤ 45% 5.7.1.4 All other constituents' individual weights must be lower than those of the higher-weighted constituents (i.e. a descending weight structure). 2. The Stock Exchanges were directed to submit their proposal for NBIs having derivativ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....he 1. The top 3 constituents will have a target weight at the end of tranche 4. In each adjustment, the weight of top 3 constituents would be checked and if the weights are beyond the prudential norms, the excess would be targeted for reduction equally over the remaining tranches. This is illustrated with an example below. 4.2.2.2. Assume the present weight of a constituent at Rank 1 by weight is 28% and the target weight is 20% (i.e. weight adjustment is 8%). 4.2.2.3. In the first tranche, the weight would be adjusted by 2% (i.e. 8% divided in 4 tranches) to 26%. At the beginning of the next tranche, weights of all the constituents would be re-evaluated for confirmation with prudential norms. Let's assume that the weight of Rank 1 co....