In the significant move aimed at bolstering investor protection and market stability by SEBI (covered here), the NSE has announced a revision in the contract sizes for various index derivatives. Here’s everything you need to know about this pivotal change and its implications for market participants.
The SEBI guidelines mandates that an index derivative contract must maintain a minimum value of Rs. 15 lakhs at the time of its introduction. To ensure compliance, NSE has revised the lot sizes of multiple index derivatives to keep their contract values within the range of Rs. 15 to 20 lakhs as per the review conducted from September 16, 2024, to October 15, 2024.
The updated lot sizes for index derivatives are as follows:
- Nifty 50 (NIFTY): Previously 25, Revised to 75
- Nifty Bank (BANKNIFTY): Previously 15, Revised to 30
- Nifty Financial Services (FINNIFTY): Previously 25, Revised to 65
- Nifty Midcap Select (MIDCPNIFTY): Previously 50, Revised to 120
- Nifty Next 50 (NIFTYNXT50): Previously 10, Revised to 25
The revised lot sizes will be applicable to all new index derivatives contracts (including weekly, monthly, quarterly, and half-yearly) introduced from November 20, 2024. Existing weekly and monthly expiry contracts will continue with the current lot sizes until their expiration. For quarterly and half-yearly contracts, the transition to the new lot sizes will occur on December 24, 2024 (for BANKNIFTY) and December 26, 2024 (for NIFTY).
Traders holding positions in existing contracts should take note of the transition dates and plan accordingly to adapt their strategies. With the new lot sizes coming into effect, adjustments in portfolio allocations (margin) and hedging strategies may be necessary to align with the updated contract terms. Applicable margin for these contracts is yet to be disclosed by the Clearing Corporation / Exchange but as a general guideline, you can anticipate that the margin will increase in proportion to the revised lot size.