The National Stock Exchange (NSE) has established a tick size of 1 paisa for stocks priced below Rs 250 per share.
The National Stock Exchange (NSE) has significantly reduced the tick size from 5 paisa to 1 paisa, starting from June 10.
This change aims to boost liquidity and make price adjustments. This change will affect all securities but excludes certain series of exchange-traded funds (ETFs) like EQ, BE, BZ, BO, RL, and AF.
Tick size will be reviewed every month
The NSE has stated that the tick size for securities under T+1 settlement will also apply to those under T+1 settlement.
As per NSE’s circular, the tick size will undergo monthly reviews based on the closing price of the last trading session each month.
what is tick size
Tick size refers to the smallest price increment between consecutive buy and sell prices.
A smaller tick size enables more precise price adjustments and results in better pricing.
For instance, if a stock’s tick size is Rs 0.10 and its last traded price is Rs 50, the next buy price would be Rs 49.90, Rs 49.80, Rs 49.70, and so on.
This means that bid prices like Rs 49.85 or Rs 49.92 would not be valid as they do not align with the 10 paise tick size criteria.
What will be the effect of changing the tick size
Experts believe that this change will align the NSE’s pricing system with the Bombay Stock Exchange (BSE).
In March of last year, BSE reduced the tick size for stocks priced below Rs 100 to 1 paisa.
BSE’s market share in the cash market is projected to rise from 7 percent in 2023 to 8 percent in 2024.
Additionally, its share in the futures and options (F&O) segment has surged from 5.3 percent to 17 percent during the same period.
The reduction in tick size is expected to enhance price discovery, liquidity, and overall trading efficiency in the market.
