Changes in Lot Sizes of Derivatives Contracts on NSE and BSE4 min read
Derivatives trading plays a significant role in India’s financial markets, offering traders and investors opportunities to hedge risk and speculate on price movements. The recent changes in lot sizes for index derivatives contracts on both NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) have been issued following SEBI’s (Securities and Exchange Board of India) directive. These changes, effective from November 20, 2024, will have a direct impact on market participants, affecting margin requirements and the cost of entering derivative positions.
In this blog, we will explore these changes, explain their implications, and present the revised lot sizes for key indices on both exchanges.
SEBI’s Directive on Lot Size Changes
On October 1, 2024, SEBI issued a circular introducing changes to the lot sizes of index derivatives on both NSE and BSE. This change was implemented to adjust the market lot sizes to current market conditions and liquidity, ensuring that the exposure for traders aligns with the market’s risk profile. The changes will apply to all new contracts introduced after November 20, 2024.
Both exchanges—NSE and BSE—have now published their respective circulars with detailed instructions for market participants. You can access the official circulars here:
Let’s dive into the details.
NSE Derivatives: Revised Lot Sizes
NSE index derivatives, including options and futures contracts, are crucial for traders. The revised market lots for key indices have been computed using the average closing prices of the underlying indices from September 16, 2024, to October 15, 2024. Below is a tabulated summary of the changes in lot sizes for NSE’s major indices.
| S.No. | Index Name | Present Market Lot | Revised Market Lot |
| 1 | Nifty 50 | 25 | 75 |
| 2 | Nifty Bank | 15 | 30 |
| 3 | Nifty Financial Services (FinNifty) | 25 | 65 |
| 4 | Nifty Midcap Select (Midcap Nifty) | 50 | 120 |
| 5 | Nifty Next 50 | 10 | 25 |
BSE Derivatives: Revised Lot Sizes
BSE has also announced changes to its derivatives contracts, affecting indices such as the BSE Sensex, BSE Bankex, and BSE Sensex 50. Like NSE, these changes will apply to contracts introduced after November 20, 2024. The following table illustrates the old and new lot sizes for key BSE indices.
| S.No. | Index Name | Present Market Lot | Revised Market Lot |
| 1 | BSE Sensex | 10 | 20 |
| 2 | BSE Bankex | 15 | 30 |
| 3 | BSE Sensex 50 | 25 | 60 |
Impact on Existing Contracts
- Monthly Index Derivatives Contracts:
- Existing unexpired monthly contracts (November 2024, December 2024, and January 2025) will retain their current market lot sizes.
- New monthly contracts generated after November 20, 2024 will have the revised market lot sizes.
- Weekly Index Derivatives Contracts:
- Weekly contracts generated before November 20, 2024, will maintain their old lot sizes.
- New weekly contracts introduced after November 22, 2024, will reflect the revised lot sizes.
- Each exchange will offer weekly contracts for only one index from November 20, 2024.
- Long-Dated Index Options Contracts:
- Long-dated contracts (quarterly and half-yearly) expiring in March 2025 or later will retain their old lot sizes until December 27, 2024. After this date, they will switch to the new lot sizes.
Impact on Traders
The lot size increase will directly affect the cost of entering trades and the margin requirements for both buyers and sellers. Let’s consider an example:
- Previously, a trader buying a Nifty 50 option at a premium of ₹100 would pay ₹100 x 25 (existing lot size) = ₹2,500 per lot. With the revised lot size of 75, the trader will now have to pay ₹100 x 75 = ₹7,500 per lot.
- Similarly, option sellers will now need to maintain higher margins. For example, if the margin required to sell one lot of Nifty 50 options was previously ₹70,000, the new margin requirement with the increased lot size could be ₹2,10,000.
What Should Traders Do?
- Adapt to Changes: Traders need to adjust their strategies according to the new lot sizes, especially those who rely on margin-based trades.
- Monitor Positions: If you hold existing positions in derivatives, ensure you’re aware of whether your contracts will be affected by the changes.
- Plan Ahead: For those planning to take new positions after November 20, 2024, be mindful of the increased exposure and margins required for your trades.
Conclusion
The changes in lot sizes for derivatives contracts on NSE and BSE reflect the market’s evolving dynamics and SEBI’s commitment to ensuring liquidity and risk management. While the new lot sizes will require traders to adjust their strategies, they are designed to ensure that participants remain aligned with market risks and liquidity needs.
By understanding these changes and preparing in advance, traders can continue to capitalize on opportunities in the derivatives markets. Stay updated, review the official circulars for detailed information, and adjust your trading strategies accordingly to make the most of the new trading landscape.
Explore the NSE Circular and BSE Circular for more details!
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