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Stocks

NSE changes lot sizes for 144 stocks

After the sudden upmove, a number of stocks have gone so far north that their lot sizes, which are usually calibrated to about 2 lakhs worth contracts each, are now a lot more expensive. So, from September, 144 stocks will have a realigned lot size.

19 stocks have had their lot size divided by four, 122 are cut to half and 2 have been rounded off after division. Only one stock, Sterling Biotech, has seen the lot size go up.

The last time this kind of operation was announced was in December 2008, increasing lot sizes for contracts starting March 2009. And now, this will happen only for contracts expiring in September 2009, i.e. new contracts introduced after the June expiry. Lot sizes for the June, July and August expiries do not change.

Why not? Because they’ve been traded for the last few months – remember that the June contract opened after the March Expiry, i.e. on March 27th. But there’s nothing wrong with doing it technically, if you’re cutting down lot sizes of course…you just multiply the held lots by the same number you are dividing the lot size. I think the NSE wants to do the same thing both ways – when they increased the lot sizes they *had* to wait three months.

Also the reason why they always choose a multiple is to let calendar arbitrage happen – where I would like to buy one contract and sell another, and thus hedge.

Overall, the idea is good and should help in liquidity and attracting retail participation. It may soon be time to revise contract sizes again, though I don’t know which way!

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