Following the order of market regulator SEBI, the National Stock Exchange (NSE) has increased the lot size of all its five index derivative contracts. The lot size of Nifty 50 has been increased from 25 to 75, which is an increase of 3 times. The lot size of Nifty Bank has been increased from 15 to 30.
NSE has increased the lot size of Nifty Financial Services, also known as Fin Nifty, from 25 to 65. At the same time, the lot size of Nifty Midcap Select has been increased from 50 to 120. Whereas, the lot size of Nifty Next 50 has been increased from 10 to 25.
This order will be effective from 20th November 2024
NSE has said that from November 20, 2024, all index contracts will be issued as per the changed rules. However, some monthly, quarterly and half-yearly contracts already issued will remain in their existing lot sizes till their expiry.
Even though NSE has decided to change the lot size from November 20, but due to the contracts issued before this, the time taken for the contract will vary according to the new lot size. No contract will be able to expire as per the new lot size before January 2 next year. Additionally, there will be times when both new and old lot size contracts will be available at the same time.
Contract size increased to ₹15 lakh for index derivatives
To protect retail investors from losses, the Securities Exchange Board of India i.e. SEBI had issued a new circular on October 1 regarding Futures and Options (F&O). After that NSE has made changes in the lot site. SEBI's new rules are based on the recommendations of an Expert Working Group (EWG) to strengthen the equity index derivatives framework.
Why did SEBI implement new rules?
The derivatives market is quite risky. At present, SEBI's concern is that the stake of retail investors is increasing in it. SEBI believes that investors are coming into this because they expect to get very high profits from here.
However, most of such investors do not have an understanding of the derivatives market. The objective behind increasing the lot size on behalf of SEBI is that only such investors who think seriously about the market should enter the derivatives market.
What are futures and options?
Futures and Options (F&O) are a type of financial instruments that allow an investor to take large positions in stocks, commodities, currencies with less capital. Futures and options are a type of derivative contracts that have a fixed duration.
Within this time frame, their prices change according to the stock price. Futures and options on each share are available in one lot size.
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