Standardized lot size for derivative contracts

SEBI vide circular SEBI/DNPD/Cir- 50/2010 dated January 8, 2010 has standardized the lot size for derivative contracts on individual securities.

Lot size is the number of underlying units that form a derivative contract. Lot size is multiplied by the share price to calculate the value of a derivative contract. Currently the SEBI rules require derivative (F&O) contracts, other than mini contracts, to have at least two lakh rupees in value. Based on this rule, stock exchanges fix lot sizes of the derivative contracts of individual securities. SEBI has now decided to determine the lot size based on the price band in which the individual securities trade (refer to the table provided in the circular). For example, if a particular stock trades at INR 700, it falls in the price band ‘401 – 800’ and correspondingly it will have a lot size of 500. Stock exchanges will review the lot size once in every 6 months based on the average of the closing price of the underlying for last one month and wherever warranted, revise the lot size by giving an advance notice of atleast 2 weeks to the market. This circular will come into effect from March 31, 2010.

A copy of the circular is available here.