FNO changes in JULY

F&O
1

@nithin
I heard that some stocks are being removed from FNO from JULY, eg. Andhrabank and few others. Is that true?
Does that mean that we can buy stocks in cash segment for the same lot size as FNO?

The reason I asked this question is that I see in Zerodha Margin calculator that IN JUL the lot size will be increased to 13000 from 10000.
So, will Andhrabank continue to be in FNO segment from JULY onwards with new LOT SIZE or it will become a stock only of the CASH Segment? Please share your views.

Thanks.

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When stock prices come down, exchange increase lot size to keep up with the minimum Rs 5lk contract value prescribed by SEBI. So yeah from July lot size goes upto 13000. But it still trades on F&O

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Thanks so much @nithin for personally writing to me. Thanks again. So, does that mean that this will be available in Aug, Sep, Oct, etc. and not get out of FNO segment?

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@nithin, This URL on Bloomberg mentions the stocks moving to Physical Settlement from July.

Please, confirm that the stocks mentioned here will be in ONLY CASH or CONTINUE IN FNO with HIGHER LOT size?

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Hi @Angel_Rishi,

These stocks will continue to be available in F&O segment and there is no change (as of now) in their respective lot sizes.

What is changing is the settlement method upon expiry. Instead of settling in cash, now the sellers have the potential liability of providing that many number of shares in the lot.

Bottomline is :

  • Intraday: If you are an intraday trader in F&O segment, you don’t have to worry. Nothing has changed for you
  • Before Expiry: If you take delivery of these F&O contracts but square off the position before expiry, there is no change for you as well
  • Upon Expiry If you want to carry the position into expiry, be ready to go the physical settlement route.

The basic motive behind this move is that STT (which is a MAJOR source of revenue for Indian govt.) is double in the cash segment as compared to F&O segment. But majority of retail participants are trading in F&O segment, hence the government is losing $$ on these opportunities.

By introducing such measures, their intent is to encourage traders to move to cash segment. They also site excessive speculation in F&O segment as a probable cause but as they say…always follow the money :slight_smile:

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Thanks so much for your reply.

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what is the meaning of ‘physical settlement’?

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I believe, physical settlement means, future contract will convert into equity stocks, which is delivered to your cdsl/nsdl demat account.

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Currently, equity derivatives are cash settled. This means difference between the entry price and exit price is either debited or credited in cash. In physical settlement, traders will have to take delivery of the shares against the derivatives position.

Read more at:
//economictimes.indiatimes.com/articleshow/60412437.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

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So, if we rollover or sell before expiry, we are same as now. Right?
But, how will this effect volumes? Even now people either rollover or exit the stock before expiry. I have not heard someone not exiting the FUTURES on the expiry date.
I have heard people let OPTIONS expire which gets settled later by the exchange.

So, I guess that the main problem will be with OPTION writers and not FUTURES buyers/sellers?

Please confirm.

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Yeah, I believe so. People do take Futures contacts to expiry as well…so anyone who is willing to do so will have to have shares, else risk default.

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