NSE revises F&O market lot for 62 securities

The National Stock Exchange (NSE) has proposed to revise the size of the market lot for 62 securities in futures and options (F&O) segment with effect from July 28. The market lot size of 32 securities will be halved, while for 30 others the lot size will be doubled.

The minimum prescribed limit for a market lot of any stock futures or index futures is over Rs 2 lakh. However, the contract size of the 32 stocks is currently more than double than the minimum prescribed limit.

This is why NSE is reducing the contract size. In case of the other 30 stocks, the value of contract size has declined below the minimum prescribed limit.

Following this, an investor's exposure to market will come down for 32 stocks and increase for 30 stocks. Margin on these stock futures varies between 22-25 per cent. The Nifty futures margin is 12.5 per cent.

To avoid operational complexities for the 30 securities where the market lot size has been doubled, only the far month contract "" October 2006 expiry contracts "" will be revised.

Of the 32 securities for which market lot has been cut down by 50 per cent, market lot for Gujarat Ambuja Cement and Tata Motors will be revised only for contracts expiring in October.

Contracts with maturity in August 2006 and September 2006 would continue to have the existing market lots. All subsequent far month contracts (October 2006 expiry and beyond) will have revised market lots.

Last year, market lots of derivative products were revised in April and May.

The minimum value of a contract on a particular day is determined by multiplying the market lot by the closing price of the underlying security on that day.

Even after the size of the lot has been revised downwards for 32 stocks, the current market value of eight stocks has been over Rs 3 lakh, while for nine others the value has been hovering between Rs 2.50-3.00 lakh. This is higher than the prescribed minimum value of Rs 2 lakh each.