Implementation of eligibility criteria for derivatives on existing Non-Benchmark Indices
Summary
This circular mandates that stock exchanges adjust constituents and weights in existing Non-Benchmark Indices (NBIs) to meet specific prudential norms for derivatives. It establishes distinct implementation timelines, requiring immediate adjustment for BANKEX and FINNIFTY by December 31, 2025, and a phased approach for BANKNIFTY until March 31, 2026. Stock Exchanges and Clearing Corporations are instructed to update their systems and regulations to ensure compliance with these eligibility criteria.
Text
Clause 5.7 of SEBI circular no. SEBI/HO/MRD/TPD-1/P/CIR/2025/79 dated May 29, 2025, stipulates the following prudential norms with respect to eligibility criteria for derivatives on Non-Benchmark Indices (NBIs): 5.7.1 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).
For compliance with the eligibility criteria prescribed at para 1 above, stock exchanges shall undertake necessary constituent / weight adjustments in existing NBIs.
the compliance with prudential norms may be implemented through constituent / weight adjustment in single tranche for the two indices BANKEX (derivatives traded on BSE) and FINNIFTY (derivatives traded on NSE)
the compliance with prudential norms in case of BANKNIFTY (derivatives traded on NSE) may be implemented in a phased manner, over four monthly tranches, as illustrated below, in order to ensure orderly rebalancing of AUM tracking the index:
The new constituents would be added in tranche 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.
The excess weight after adjustment from the top constituents would be distributed amongst the other constituents as long as they meet the prudential norms mentioned
upto March 31, 2026 for BANKNIFTY.
upto December 31, 2025 for BANKEX and FINNIFTY.
Stock Exchanges shall ensure that the process of compliance with prudential norms for the aforementioned indices are implemented latest by the aforementioned timelines.
Stock Exchanges and Clearing Corporations are required to take necessary steps to put in place systems and processes for implementation of this Circular, including advance intimation to market participants, necessary amendments to the relevant bye-laws, rules and regulations, if any.
Source: SecMarx — Implementation of eligibility criteria for derivatives on existing Non-Benchmark Indices. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.