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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Legal and Regulatory Environment

Under the SEBI framework for equity derivatives in India, which of the following is the standard position regarding the minimum contract size of index derivatives at the time of introduction?

The exchange fixes the contract size, following SEBI's prescribed minimum contract value norms. Brokers and clearing banks have no role in setting it, and a single unit contract would fall short of the required minimum value, so the lot size is set by the exchange within SEBI's framework.

  1. AIt is fixed by each broker for its own clients
  2. BIt is not regulated and is decided only by the clearing bank
  3. CIt is fixed by the exchange in line with SEBI's prescribed minimum value norms for a contractCorrect
  4. DIt is always equal to one share or one index unit

Explanation

SEBI prescribes norms on the minimum contract value for derivatives contracts, and the exchange fixes the lot size accordingly. Brokers and clearing banks do not set contract size. A one-unit contract would not meet the minimum value requirement.

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