Index Derivatives Get New Rules: NSE Announces Quantity Freeze Limits

The National Stock Exchange (NSE) has revised the quantity freeze limits for index derivatives contracts, or the number of lots which can be placed in a single order, with the new limits coming into effect starting from September 1, 2025.

According to an NSE circular, the revised applicable freeze limits for key indices will be as follows: Bank Nifty at 900, Nifty at 1,800, Finnifty at 1,800, Nifty Midcap Select at 2,800, and Nifty Next 50 at 600.

Other than the quantity freeze limits for Bank Nifty – revised to 900 from the earlier 600 – the limits for all other contracts remain unchanged when compared to the earlier limits.

What Are These Quantity Freeze Limits?

In simple words, these quantity freeze limits are the maximum permissible order size for a particular F&O contract. Exchanges typically put such limits in place in order to prevent abnormally large orders which could impact the stability of the overall market.

These limits are regularly revised by the stock exchanges ad as the market levels rise, the bourses typically increase the freeze limits which NSE has done in its latest revision.

Additionally, these limits are essential as there have been several instances of so-called 'fat finger' trades across markets globally, including in India, wherein abnormally large orders were inadvertently punched in.

For example, an order for 1,000 lots of a contract could be inadvertently punched in as 1,00,000 lots. In such instance, a quantity freeze limit plays an important role as such an abnormally large or inadvertently punched order would not get executed.

How Are These Limits Revised?

There are certain pre-determined slabs which are fixed with respect to index levels and the limits are revised accordingly.

In case of NSE, the limits is fixed at 900 for an index which is in the range of 40,000 to 55,000 - the Bank Nifty is currently hovering around 53,800 levels.

the limit is pegged at 600 for indices trading above 55,000 and the quantity freeze limit is inversely proportionate to the index level. In other words, as the index level reduces, the quantity freeze limit rises. The limit is 1,200 for indices in the range of 27,500 to 40,000.

It is very important that such limits are revised accordingly, given the market movement as well as volatility.

For example, while the Bank Nifty was around 47,900 levels in March, two years ago in September 2023, it was below 44,500.

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