The National Stock Exchange (NSE) has reduced the business lot size for derivative contracts on the Nifty 50 index, which will relieve retail traders of the burden of excessive upfront margins. The lot size has been reduced from 75 to 50, according to a circular issued by the NSE on Wednesday.
According to Tejas Khoday, CEO of stockbroking company FLYERS, the reduction in the NIFTY lot size would reduce margin requirements for futures trading by one-third. Traders currently need about Rs 173,000 to trade a single lot, he said.
The margin requirement will be reduced to about Rs 1,16,000 from July onwards (at current Nifty prices). This is a brilliant move by the NSE to relieve retail traders of the pressure of unsustainable upfront margins, he said.
From July onwards, the margin requirement will be reduced to about Rs 1,16,000 per transaction (at current Nifty prices). He called the NSE’s attempt to relieve retail traders of the burden of unsustainable upfront margins “brilliant.”
“Only the far month contract, i.e. July 2021 expiry contracts, will be revised for business lots. The current market lots will apply to contracts with maturities of May 2021 and June 2021. The business lots for all subsequent contracts (i.e., July 2021 monthly expiry and beyond) will be updated, according to the NSE.
The day spread order book will not be valid for the combination contract of May-July 2021 and June-July 2021 expiries, according to the bourse. Contracts with a weekly expiry date after August 20, 2021, will have their market lots changed.