NSE Tightens Criteria for Securities Eligible as Collateral for F&O Trading

In a significant move to enhance market integrity and liquidity, the National Stock Exchange (NSE) has announced new criteria for securities eligible as collateral in the futures and options segment. Starting August 1, over 1,000 securities will no longer qualify under the tightened guidelines set by NSE Clearing Ltd. This change is expected to impact a wide range of listed entities and necessitate prompt action from clearing members to align with the updated standards. 

NSE Tightens Criteria for Collateral Securities

Over 1,000 securities will not be eligible to trade under the futures and options segment as the country’s biggest stock exchange tightened the criteria for securities eligible as collateral. NSE Clearing Ltd. will only accept securities with an impact cost of up to 0.1% for an order of Rs 1 lakh and which are traded for at least 99% of days over the previous 6 months. Equity securities not meeting these criteria will be excluded from collateral eligibility starting August 1, according to the National Stock Exchange’s announcement on Thursday.

NSE Releases List of Affected Securities

The NSE released a tentative list of 1,010 securities that do not currently meet the new criteria, including One 97 Communications Ltd., Yes Bank Ltd., Suzlon Energy Ltd., Bharat Dynamics Ltd, Bharti Hexacom Ltd, and Tata Investment Corp. The final list of acceptable securities will be published as part of the monthly circular of approved securities. Clearing members are urged to replace any unapproved securities with approved collaterals promptly. To facilitate this transition, NSE Clearing Ltd. will continue to provide valuations of the existing unapproved securities repledged with NCL as of July 31, 2024, after applying the necessary haircut.

Conclusion: The NSE’s tightened criteria for securities eligible as collateral is a significant move aimed at enhancing market stability and ensuring higher liquidity. Clearing members must act swiftly to replace unapproved securities to comply with the new regulations and maintain seamless trading operations.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions