European Style Stock Options
Summary
SEBI grants Stock Exchanges the flexibility to offer either European or American style stock options. Once a specific exercise style is chosen, the Exchange must apply it uniformly to all eligible stocks and requires SEBI approval for any changes. Exchanges must establish proper systems, amend regulations, and notify market participants at least one month prior to implementation.
Text
In consultation with Stock Exchanges, it has been decided to provide flexibility to Stock Exchanges to offer either European style or American style stock options.
After opting for a particular style of exercise, a Stock Exchange shall offer option contracts of the same style on all eligible stocks.
All other contract specifications, including risk management framework applicable for American style stock options, shall apply to European style stock options. Any modification shall require prior approval of SEBI.
put in place proper systems and procedures for smooth introduction of European style stock options
make necessary amendments to the relevant bye-laws, rules and regulations for introduction of European style stock options
notify all categories of market participants, including general public, and also to disseminate the same on their websites, at least one month in advance of implementing the switchover in the exercise style.
After opting for a particular style of exercise, a Stock Exchange may change to another style of exercise only after seeking prior approval of SEBI.
This circular is issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act 1992, read with Section 10 of the Securities Contracts (Regulation) Act, 1956 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
The circular shall come into force from the date of the circular.
Source: SecMarx — European Style Stock Options. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.