BSE and NSE Lot Size Changes for Index Derivatives

The significant increase in derivatives trading volumes in India over the past few months has raised concerns for SEBI (Securities and Exchange Board of India). To address the uncontrollable rise in derivatives volumes, SEBI has implemented new regulations that require a minimum contract value of Rs.15 lakhs for index futures and options (F&O) when launching new contracts. In this article, we will discuss the changes in BSE and NSE lot sizes, along with the implementation of these new sizes.

BSE and NSE Lot Size Change: The Revised Structure

As mentioned above, SEBI has drawn a new circular to strengthen the framework of equity index derivatives to improve market stability and increase investor protection. For this purpose, the lot sizes are fixed in such a way that the contract value of the derivative on the day of review is within Rs. 15 lakhs to Rs. 20 lakhs.

For the computation of bse & nse f&o lot size, the average of the closing price of the underlying index has been taken for a one-month period of September 16, 2024, to October 15, 2024. The lot sizes for index derivatives shall be revised for contracts that are introduced after November 20, 2024, as per the below table – 

When Will the Lot Size Change Be Implemented?

The changes shall be effective for all new index derivatives contracts (including weekly, monthly, quarterly, and half-yearly) introduced from November 20, 2024. The existing weekly and monthly expiry contracts will continue with the existing lot size till their respective expiry date. 

For longer-term contracts, such as quarterly and half-yearly expiries, the transition to the new, larger lot sizes will occur on the following dates:

• BANKNIFTY contracts will be updated to the new lot size at the close of trading on December 24, 2024.

• NIFTY contracts will transition to the new lot size at the close of trading on December 26, 2024.

• BSE SENSEX contracts will change to the new market lot at the close of trading on December 27, 2024.

After these dates, all remaining quarterly and half-yearly contracts for these indices will reflect the revised lot sizes.

Here’s a table summarizing the effective dates for various indices:

BSE and NSE Lot Size Change Impact on Stock Derivatives

Currently, the changes have only been applied to index derivatives, and there have been no announcements regarding changes in lot size for stock derivatives. 

Conclusion

The adjustments in the BSE & NSE lot size have been implemented in accordance with the SEBI guidelines in order to improve market stability. Many inexperienced retail traders have entered the derivatives market and many of them have ended up incurring losses. These measures will encourage careful participation in derivatives trading, ultimately shielding less experienced participants from potential high-risk exposure.