Sebi allows mini-contracts on Sensex, Nifty

Securities and Exchange Board of India (Sebi) today introduced mini-contracts in the derivatives markets based on the Sensex and the Nifty indices to improve liquidity and increase investor participation for the index-based products.

Mini-contracts are a fraction of normal derivatives contracts, and will help individual investors hedge risks of a smaller portfolio.

Initially, the mini-contracts would be limited to index futures and options on the 30-share BSE index and the 50-share NSE index.

The Bombay Stock Exchange (BSE), in a separate release, said it would launch the mini-contracts on the Sensex from January 1. The mini Sensex contracts will have a market lot of five units.

The small size of the contract would be attractive for retail investors as there would be comparatively lower capital outlay, lower trading costs, more precise hedging and flexible trading, the BSE release said.

The security symbol for the Sensex mini-contracts would be MSX and it would be available for one, two and three months along with weekly options, BSE said.

NSE officials were not available for comments, but it is expected that the exchange would also announce the launch soon.

The recommendation to introduce mini-contracts was made by Professor M. Rammohan Rao, who headed the Derivatives Market Review Committee (DMRC) of Sebi.

The move to introduce mini-contracts follows its increasing popularity globally due to the higher liquidity and the ability to get in and out of a trade quickly with low impact cost.