F&O Update: NSE Trims Lot Sizes for Nifty 50 and Two Others

Introduction

In a significant move, the National Stock Exchange (NSE) has announced a reduction in the lot sizes for derivatives contracts across key indices. Notably, the lot size for the benchmark NIFTY50 has been halved from 50 to 25, while the lot size for Nifty Financial Services has been slashed to 25 from 40, and that for Nifty Midcap Select has been reduced to 50 from 75.

What’s Agenda behind it?

This revision in lot sizes has been done for the purpose of enhancing participation in market and derivative contract’s liquidity. NSE aims to reduce entry barriers for traders, by lowering the lot sizes, therefore encouraging participation of retails. This move is expected to not only boost trading volumes but also activity of overall market.

Nifty contracts expiring from April 26, 2024, under the revised lot sizes, onwards will adhere to the new market lot sizes. While the first weekly expiry contract with the revised lot size for NIFTY50 will expire on May 2, 2024, the first monthly expiry contract with the updated lot size is set to expire on May 30, 2024.

For Nifty Financial Services, existing monthly expiries up to June 25, 2024, will maintain their current market lot sizes. But, starting from expiry of July 2024, contracts will adhere to the revised lot size. Similarly, for Nifty Midcap Select, the existing monthly expiries up to June 24, 2024, will hold their current sizes of lot, with revisions taking effect from July 2024 onwards.

Decision of NSE to revise sizes of lot follows its recent announcement regarding changes in market lot sizes for 54 individual derivative stocks. The adjustments aim to align with not only market dynamics but also trading efficiency enhancement.

To Summarize

NSE's move to reduce lot sizes of NIFTY50, Nifty Financial Services, Nifty Midcap for key indices is expected to not only spur activity of trading but also enhance liquidity in the market. By lowering not only entry barriers but also encouraging retail participation, these reforms holds a aimbition to foster a more vibrant and accessible derivatives market, ultimately benefiting investors and market participants alike.