1 paisa tick size for stocks below Rs 250: NSE
This tick size is reduced to one paisa in the cash segment from five paisa currently. Previously, BSE had initiated a similar change by reducing the tick size to one paisa for stocks trading below Rs 100.
The National Stock Exchange (NSE) has implemented a new tick size system for stocks trading below Rs 250 per share. Tick size refers to the minimum price movement allowed for a particular security during trading.
With this, the tick size for all stocks priced below Rs 250 per share has been standardized to one paisa. This means that the smallest price increment allowed for these stocks will be one paisa. This change aims to enhance liquidity and trading efficiency, particularly for lower-priced stocks, by reducing the spread between bid and ask prices and encouraging more active trading.
Additionally, the NSE has specified that the tick size for stock futures will align with the tick size of the underlying security in the Capital Market Segment (CM Segment). This ensures consistency and uniformity in tick sizes across different types of securities, simplifying trading practices and promoting fair market conditions.
“Exchange has informed about revision in tick size of securities price below Rs 250 in Capital Market Segment (CM Segment) of NSE. The stock futures shall have the same tick size as applicable for underlying security in CM Segment,” NSE stated.
This tick size is reduced to one paisa in the cash segment from five paisa currently.
Last year, the Bombay Stock Exchange (BSE) had initiated a similar change by reducing the tick size to one paisa for stocks trading below Rs 100 in the cash segment. Reducing the tick size to one paisa for lower-priced stocks serves several purposes. It enhances market liquidity by narrowing the spread between bid and ask prices, making it easier for traders to execute transactions at more precise price levels. It also helps in price discovery.
The NSE circular indicates that there will be changes in tick sizes for various types of securities, except Exchange Traded Funds (ETFs), across different series. Securities trading under EQ (Equity), BE (Bonds), BZ (Z group), BO (Block Deals), RL (Rights Entitlements), and AF (Additional Surveillance) series will have their tick sizes altered. Previously, these securities had a tick size of five paise. Whereas, The tick size that was applicable for securities traded with a T+1 settlement will now also be applied for securities traded with a T+0 settlement (series T0). This means that the tick size for T+1 settlement securities will now apply to same-day settlement securities as well. NSE circular cleared.
The NSE has announced that the tick sizes for securities will be subject to regular review and adjustments. These reviews will occur monthly, based on the closing price of the last trading day of each month. The tick sizes for securities will not remain static but will instead be reviewed and adjusted on a monthly basis.
From July 8 onwards, stock futures will adopt the same tick size as applicable in the cash market segment. The tick size for stock futures will align with the tick size of the underlying securities in the cash market. Additionally, any revisions in tick size will be applicable across all expiries of stock futures, including near-month, middle-month, and far-month expiries. NSE cleared all the confusions through its circular.