Market Lot Size of Derivatives Contracts Revised

Here’s an important update for the traders on the derivative contracts as per the circular which was released on March 31, 2021. The National Stock Exchange (NSE) has announced to cut down the market size lot for the Nifty 50 index derivative contracts.

The market size lot has been reduced to 50 from the original 75. The market lot of Nifty Bank and Nifty Financial Services would remain the same as before which is 25 and 40, respectively. Apart from Nifty, 40 other stocks have revised their market size lots, take a look at the list at the end of this blog.

This revision of the market lot has been implemented by the NSE following the Securities and Exchange Board of India (SEBI) guidelines. As per the NSE announcement, this circular will be implemented from April 30, 2021.

Here are some important pointers on how this decision will impact the current market scenario:

• By reducing the market size lot to 50, the margin requirement will be brought down to one-third for all the upcoming trading operations.
• This decision by the NSE is a great relief for the investors and retail traders since they now have to pay fewer upfront margins to the brokers for their investments in one lot.
• Currently, to carry out their trading activities, the retail traders have to invest a minimum upfront margin of Rs. 1,73,000 for one lot. But with the recent reduction in the market lot size of Nifty 50, the retailers have to pay a minimum amount of Rs. 1,16,000 for one lot.
• This reduction is applicable from July 2021 onwards and it will reduce the payment load on the investors.

To bring more light to this scenario, we will understand how this new circular will be implemented to ensure smooth functioning of the market:

• To avoid facing any hassles, the derivative contracts having the maturity period in May 2021 and June 2021 will be having their existing market lots. That means the revision guidelines won’t apply to this slot.
• The circular stated that the revision of the market lots will apply to the July 2021 monthly expiry and beyond contracts.
• The revision of the market lots will apply to the August 2021 weekly expiry and beyond contracts.
• The circular also stated that all those contracts having the Nifty long-term options with more than 3 months expiry contract can also enjoy the benefits of the revised derivative market lots. This decision will be effective after June 25, 2021.

This decision of reducing the market lot size should attract more retailers to invest and carry out successful trading in the market. This revision of circular by the NSE is a classic example of upgrading the system with modern times. It is a very relevant decision that will certainly bring an upsurge in the stock market domain and open opportunities to traders.

Following is the list of stocks whose market lot size was changed: