12 F&O Stocks to be excluded from Sept expiry – Impact and Full list


NSE, in three different exchange notices, has announced that 12 stocks will be excluded from the F&O segment for not meeting the enhanced eligibility criteria as set up by SEBI in April 2018. This is the consequence of these stocks not meeting the criteria which stated that "after a period of one year from the date of the circular, only those stocks which meet the enhanced eligibility criteria shall remain in derivatives segment".  Under the revised guidelines, F&O securities will need to have a market-wide position limit of 5 bln rupees, up from 3 bln rupees earlier, and a median quarter sigma order size of 2.5 mln rupees, up from 1 mln rupees.

In 2 such cases of Reliance Capital and Reliance Infra, since the company has decided to sign Inter-creditor agreements (ICA) with lenders, NSE has decided to take them off F&O category.

Following is the list of stocks which will be excluded:

  1.  Reliance Capital (RELCAPITAL)
  2.  Reliance Infra (RELINFRA)
  3. Birlasoft (BSOFT)
  4. Arvind (ARVIND)
  5. Dewan Housing Corporation (DHFL)
  6. Engineers India (ENGINERSIN)
  7. Hindustan Zinc (HINDZINC)
  8. IDBI Bank (IDBI)
  9. Multi-commodity exchange (MCX)
  10. Raymond Ltd (RAYMOND)
  11. Oracle Financial (OFSS)
  12. Kajaria Ceramics (KAJRIACER)

NSE has stated that the contracts for new expiry months in these securities will NOT be issued on expiry of existing contract months. Though the existing unexpired contracts of expiry months Sept 2019 would continue to be available for trading till their respective expiry and new strikes would also be introduced in the existing contract months. But no contracts shall be available for trading in the above mentioned securities w.e.f. Sept 27, 2019.

Following points are worth noting for this change:

1. Volatility in these stocks will increase as we get closer to Sept 26. Many arbitrage funds need to wind up positions in these stocks which can lead to enhanced volatility. Speculative positions (both long & short) in these stocks will also see gradual unwinding as we go along. Expect sudden buying/selling in these scripts. Additional caution required if one is trading them.

2. This is another step in dissuading retail participants in active participation in equity derivatives market. Earlier measures include physical delivery of futures contracts and tighter norms on net worth. We expect more securities to move out of the derivative segment in coming months (we are already down to 148 from peak of 215 F&O stocks).

3. Many of these stocks have extreme low liquidity – both volume wise and spread wise with higher impact cost than usual. Liquidity in options market gets even worse. This has increasingly led to price manipulation and speculators active. Regulator want to curb these activities.

4. The obvious losers from this move are the stock exchanges and brokers who have to bear reduced revenues from F&O trading. We are amid major regulatory changes in the stock markets and this will add more troubles to the bottom line.

5. The illusion of creating an efficient market by nudging investors towards cash market from F&O is an arguable one. We are seeing cornering of F&O positions towards weekly Nifty and Bank Nifty options by retail participants. Such kind of pushing is not good in the long run and will create even more imbalanced markets.

The author may have positions in the stocks as mentioned in the article above, please assume us to be biased. This is not a recommendation to buy or sell securities. This is purely information about the company mentioned. Equity investing contain risks and please consult your financial adviser for any buy and sell securities!



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