The Bombay Stock Exchange (BSE) has decreased the lot size and moved the expiry of derivatives contracts to Fridays.
The Bombay Stock Exchange (BSE) has announced that it will implement new rules and regulations for futures and options contracts on the Sensex and Bankex indices. The BSE has reduced the lot size of the futures and options contracts of the Sensex and Bankex indices and also shifted the expiry day of these contracts to Fridays from Thursdays.
The changes are set to come into effect from May 15th, 2023, and the BSE has stated that these changes aim to boost derivative trading in the Sensex and Bankex indices.
The lot size for the Sensex futures and options contracts has been reduced from 15 to 10, while the size for the Bankex futures and options contracts has changed from 20 to 15. This means that traders can buy and sell futures and options contracts in smaller quantities, making it easier for retail investors to participate in derivative trading.
In addition to the reduction in lot size, the BSE has also shifted the expiry day of its futures and options contracts to Fridays from Thursdays. This means that all futures and options contracts on the Sensex and Bankex indices will expire on Fridays, and if the expiry day falls on a trading holiday, the expiry day will be the previous trading day.
The BSE has also clarified that all existing contracts of S&P BSE Sensex and S&P BSE Bankex with an expiry day of Thursday will expire on May 12th, 2023, and will not be available for trading from May 15th, 2023. Revised specifications for S&P BSE Sensex and S&P BSE Bankex contracts with Friday expiry will be created on May 12th, 2023, and trading will commence on May 15th, 2023.
This move by the BSE is expected to encourage more participation in derivative trading on the Sensex and Bankex indices, particularly from retail investors who the larger lot sizes may have deterred in the past. The reduction in lot size should make it easier for retail investors to enter and exit derivative positions. In contrast, the shift to Friday expiry should make it easier for traders to manage their positions, particularly if the expiry day falls on a trading holiday.
Derivative contracts are financial instruments whose value is derived from an underlying asset, such as a stock or equity index. The price of a derivative contract moves in tandem with the underlying asset. Futures and options contracts are two types of derivative contracts that allow investors to buy or sell an asset at a predetermined price and time in the future.
In conclusion, the BSE's move to reduce the lot size and shift the expiry day of its futures and options contracts is a positive step towards making derivative trading more accessible to retail investors. These changes should encourage more participation in derivative trading on the Sensex and Bankex indices and make it easier for traders to manage their positions.
