Starting November 20, 2024, the National Stock Exchange (NSE) will implement revised lot sizes for several major index derivatives. The adjustments were announced in a circular issued by NSE on October 18, aimed at enhancing market efficiency and aligning with regulatory guidelines.
Key Changes to Lot Sizes
The lot size revisions impact five major futures and options (F&O) segments, including Nifty 50, Bank Nifty, Nifty Financial Services, Nifty Midcap Select, and Nifty Next 50. The updated lot sizes are as follows:
| Sr | Underlying Index | Symbol | Existing Lot Size | Revised Lot Size |
|---|---|---|---|---|
| 1 | Nifty 50 | NIFTY | 25 | 75 |
| 2 | Nifty Bank | BANKNIFTY | 15 | 30 |
| 3 | Nifty Financial Services | FINNIFTY | 25 | 65 |
| 4 | Nifty Midcap Select | MIDCPNIFTY | 50 | 120 |
| 5 | Nifty Next 50 | NIFTYNXT50 | 10 | 25 |
These changes will apply to all new index derivatives contracts introduced from November 20, 2024, onwards, covering weekly, monthly, quarterly, and half-yearly expiries.
Impact on Existing Contracts
According to NSE’s announcement, the revised lot sizes will only apply to newly introduced contracts. Existing weekly and monthly expiry contracts will continue with the current lot sizes until their respective expiry dates. Quarterly and half-yearly contracts will transition to the new lot sizes on December 24, 2024, for Bank Nifty, and December 26, 2024, for Nifty.
Reason for Changes
The decision to revise the lot sizes follows recent regulatory updates from the Securities and Exchange Board of India (SEBI). SEBI has implemented stricter regulations for equity derivatives to address the surge in retail investor options trading, which was seen as a potential risk to household finances. As part of these measures, NSE will reduce the number of weekly options contracts offered to investors.
The revised lot sizes aim to ensure that each contract value remains between ₹15 lakh and ₹20 lakh on the day of review, aligning with SEBI’s guidelines.
Market Reactions and Investor Impact
Market participants have reacted cautiously to the announcement. While some traders believe the larger lot sizes could increase the entry barrier for retail investors, others view the move as a positive step towards reducing speculative trading and ensuring greater market stability.
Analysts suggest that the changes may initially result in lower trading volumes, particularly in the Nifty 50 and Bank Nifty segments, as traders adjust their strategies. However, the revised lot sizes could lead to more substantial contract values and potentially reduce excessive short-term speculation.
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