Sebi raises equity derivative lot size to Rs 5 lakh

To safeguard small investors from high-risk products, market regulator Sebi today made a steep hike in the minimum investment size for any equity derivative product to Rs 5 lakh from Rs 2 lakh currently.
It has been decided that the minimum lot size of an equity derivative contract could be increased to Rs 5 lakh, the Securities and Exchange Board of India (Sebi) said in a circular.
The new circular would be effective from the next trading day after expiry of October 2015 contracts.
As compared to the cash equity markets, potential risks for the investors in derivatives market are considered to be much higher and therefore, the minimum investment size has been increased given the rise in the average income levels and the average trading volumes of small investors, market experts noted.

Sebi said that the lot size for derivatives contracts in equity derivatives segment would be fixed in such a manner that the contract value of the derivative on the day of review is within Rs 5 lakh and Rs 10 lakh.
For stock derivatives, the lot size (in units of underlying) would be fixed as a multiple of 25, provided the lot size is not less than 50, the market watchdog said.

However, if the contract value of the stock derivatives at the minimum lot size of 50 is greater than Rs 10 lakh, then lot size shall be fixed as a multiple of 5, provided the lot size is not less than 10, it added.

With regard to index derivatives, Sebi said that lot size (in units of underlying) would be fixed as a multiple of 5, provided the lot size is not less than 10.
Sebi asked stock exchanges to jointly ensure that the lot size is same for an underlying traded across bourses.
A derivative is a security derived from a debt instrument, share, loan, whether secured or unsecured or any other form of security. It also derives its value from the prices, or index of prices, of underlying securities.