NSE announced new lot sizes for index derivatives, doubling or tripling them. Read on to know more
The National Stock Exchange (NSE) announced the revised lot sizes for various derivatives contracts. This revision affects key indices, including NIFTY50, Nifty Bank, Nifty Financial Services, Nifty Midcap Select, and Nifty Next 50, as part of a broader initiative to enhance market stability and investor protection. The lot sizes have been doubled and in some cases tripled for index contracts.
Lot Sizes Increased; Retail Investors Need More Capital To Trade
The Sebi circular earlier had mandated that index derivative contracts must have a minimum value of Rs. 15 lakhs upon their introduction. Further, the revised lot sizes will ensure that the contract values fall within the range of Rs. 15 lakhs to Rs. 20 lakhs at the time of review. The new lot sizes have been decided based on NSE's calculation of average closing prices of the underlying indices over a month-long period from September 6, 2024, to October 15, 2024.
The updated lot sizes for index derivatives will be as follows:
Nifty 50 (NIFTY): from 25 to 75
Nifty Bank (BANKNIFTY): from 15 to 30
Nifty Financial Services (FINNIFTY): from 25 to 65
Nifty Midcap Select (MIDCPNIFTY): from 50 to 120
Nifty Next 50 (NIFTYNEXT50): from 10 to 25
These changes will apply to all new index derivatives contracts (weekly, monthly, quarterly, and half-yearly) introduced from November 20, 2024, onwards. Existing weekly and monthly contracts will retain their current lot sizes until their expiry, while quarterly and half-yearly contracts will transition to the new lot sizes by December 24 and December 26, 2024, respectively. Further Sebi advised market participants to inform clients with positions in quarterly and half-yearly contracts about these upcoming revisions to ensure smooth trading.
Sebi's Other Moves To Curtail F&O Frenzy
Sebi had earlier curtailed the weekly expires to only one index per exchange. Nifty Bank's last weekly contract (BANKNIFTY) will be on November 13, 2024; Nifty Midcap Select (MIDCPNIFTY) on November 18, and Nifty Financial Services (FINNIFTY) on November 19.
To improve market stability and protect investors, no new weekly options will be generated beyond these dates, Sebi had said, noting the exponential rise in low premium trading on expiry dates.