median quarter-sigma order size
Also written MQSOS · MQSOS (median quarter-sigma order size)
A liquidity eligibility test for stock derivatives — the median order size, over six months, needed to move the stock price by a quarter of a standard deviation — which must be at least Rs 75 lakh.
In plain language
Before a stock can have futures and options on it, the exchange has to be sure enough people actually trade it. One of the tests for that is how much buying or selling it takes to nudge the price a small amount.
The median quarter-sigma order size, or MQSOS, measures exactly that: the typical order size needed to move the stock's price by a quarter of its standard deviation. A bigger MQSOS means the stock can absorb bigger orders without the price jumping — a sign of good liquidity.
How it works
MQSOS is one of four eligibility conditions the workbook lists for individual stocks on the derivatives segment:
- Market capitalisation and average daily traded value, on a rolling six-month basis.
- Median quarter-sigma order size (MQSOS) over the last six months, on a rolling basis, must be not less than Rs 75 lakh.
- Market wide position limit (MWPL) in the stock must be not less than Rs 1,500 crore, on a rolling basis.
- Average daily delivery value in the cash market must be not less than Rs 35 crore in the previous six months, on a rolling basis.
All four are checked together; a stock has to clear each one, not just the MQSOS test alone, to remain eligible for derivatives.
A worked example
Stock XYZ is reviewed for continued derivatives eligibility. Over the last six months, its median quarter-sigma order size works out to Rs 82 lakh — comfortably above the Rs 75 lakh floor.
Its MWPL is Rs 1,800 crore (above the Rs 1,500 crore floor) and its average daily delivery value in the cash market is Rs 40 crore (above the Rs 35 crore floor), so XYZ clears all the liquidity tests. If XYZ's MQSOS had instead fallen to Rs 60 lakh, it would fail this one test even if every other condition was comfortably met, and the stock would be at risk of exit from the derivatives segment.
Why NISM asks about it
Chapter 6, section 6.2, lists MQSOS as one of four rolling six-month eligibility criteria for stock derivatives, alongside market capitalisation/traded value, MWPL and average daily delivery value. Expect a question naming the exact Rs 75 lakh MQSOS threshold, possibly alongside the other three figures in the same list.
Common exam traps
- Rs 75 lakh is the MQSOS floor — do not confuse it with the Rs 1,500 crore MWPL floor or the Rs 35 crore average daily delivery value floor from the same list.
- MQSOS measures a quarter of a standard deviation price move, not a full standard deviation — the "quarter-sigma" in the name is precise, not approximate.
- All figures in this test are assessed on a rolling six-month basis, not a single day or month.
Where this is taught
Free preparation for NISM Series VIIIRelated terms
- Impact costThe percentage by which a market order's actual execution price degrades against the ideal price — the mid-point of the best bid and the best offer — and so the real cost of trading in size.
- Market Wide Position LimitThe ceiling on total open interest in a stock's futures and options across exchanges — 20% of non-promoter shares. Above 95% no fresh positions are allowed until it falls to 80%.
- Product Success FrameworkSEBI's exit-eligibility test for index and stock derivatives, based on trading-member participation, trading frequency and turnover, applied after a 6-month gestation period.