NSE Cuts Nifty Bank Futures Lot Size: Here's How It Impacts Retail Investors

The National Stock Exchange has reduced the market lot size for Nifty Bank futures and options to 15 from 25. The new rule is applicable from the beginning of July 2023 contracts.

This means that only the far-month July and beyond expiry contracts will be revised for market lots. Contracts with maturity of April, May and June will continue to have the existing market lots.

NSE has kept the lot sizes of Nifty 50, Nifty Financial Services, and Nifty Midcap Select unchanged at 50, 40, and 75, respectively.

Reduced market lot size will help boost retail participation in the derivatives segment. In the options market, buyers were missing. From a liquidity perspective, it will improve for Bank Nifty options.

"Do not see a reduction in market lot size for Bank Nifty impacting markets. However, it will benefit traders who are looking to trade in lower quantities and not traders who are trading in higher volumes. The aim of the NSE is to keep the lot size for F&O at 5 lakhs as per their rule book," said Chandan Taparia, head of technical and derivatives research at Motilal Oswal Financial Services Ltd.

The only concern is that Nifty and Bank Nifty will lose the parity they had earlier, as there will be a difference in the of the lot size of both of these indices. Traders who are doing a pair trade between the same or some sort of arbitrage or hedging may face some concerns, according to Taparia.

Earlier, when the lot size of Nifty Bank was reduced to 25 from 40, there was a sharp increase in retail participation.