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National Stock Exchange revised Lot size
On Tuesday NSC i.e. National Stock Exchange which manages indices issued a notification. In which they have changed the lot sizes for three major indices.
Just a few months ago the lot size of Bank Nifty was changed. Earlier the lot size was 25, in Back Nifty it was reduced to 15 and now the lot size has been changed in all the remaining indices.
NSC has announced that the lot sizes for three of the derivatives on the NSE have been reduced. The Nifty50 contract will be reduced from 50 to 25, The Nifty Financial Services contract will be reduced from 40 to 25, and the Nifty Midcap Select Contract will be reduced from 75 to 50.
| Sr. No | Underlying Index | Symbol | Present Market Lot | Revised Market Lot |
|---|---|---|---|---|
| 1 | NIFTY 50 | NIFTY | 50 | 25 |
| 2 | NIFTY FINANCIAL SERVICES | FINNIFTY | 40 | 25 |
| 3 | NIFTY MIDCAP SELECT | MIDCPNIFTY | 75 | 50 |
Implementation Timeline
The reduced lot size applies to new contracts starting April 26th, 2024.
- The first weekly and monthly expiry contracts with the new size will be for May 2nd and May 30th, 2024 (Nifty 50).
- Existing monthly contracts for Nifty Financial Services and Midcap Select expiring before July 2024 will not be affected. The reduced size will begin with the July expiry contracts (July 30th for Nifty Financial Services and July 29th for Midcap Select). Weekly contracts for these two indices maturing after July 2024 will have the new lot size.
Expected Benefits
- Increased Participation: Smaller lot sizes make derivative contracts more accessible to a wider range of investors, particularly those with lower capital. This can lead to increased market participation and trading activity.
- Improved Liquidity: A larger pool of participants can enhance liquidity in the derivative markets for these indices. This translates to tighter bid-ask spreads and potentially lower transaction costs.
- Enhanced Risk Management: Smaller contracts allow investors to manage their risk exposure more efficiently by adjusting their position sizes more precisely.
Market Reactions:
While the long-term impact remains to be seen, the move has generated mixed reactions. Brokerages and exchanges generally view it positively, expecting increased volumes and activity.
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FAQs
What derivative contracts did the NSE change the lot size for?
The NSE reduced the lot size for three derivative contracts: Nifty 50, Nifty Financial Services (Nifty Bank), and Nifty Midcap Select.
By NSE how much were the lot sizes reduced?
Nifty 50: From 50 to 25 (50% reduction), Nifty Financial Services: From 40 to 25 (37.5% reduction), Nifty Midcap Select: From 75 to 50 (33.3% reduction).
When does the change in lot size come into effect?
The reduced lot size applies to new contracts starting April 26th, 2024.
