NSE To Introduce 1 Paisa Tick Size For Stocks Cheaper Than Rs 250
Tick size represents the smallest movement in commodity prices, whether the market is rising or falling.
NSE has reduced the tick size for all securities, excluding exchange-traded funds, below the price of Rs 250 to 1 paisa, down from its previous 5 paise.
As per a circular posted by the exchange, the new tick size of 1 paisa will be applied from June 10. The exchange will also review the tick size of each security on a monthly basis, using the closing price on the last trading day of the month to determine the applicable tick size for the following month.
Tick represents the smallest movement in commodity prices, whether the market is rising or falling. It is a critical factor in arbitrage, typically representing a 0.01% shift in the market.
All securities, except ETFs—under EQ, BE, BZ, BO, RL and AF series—will see their tick sizes change from the earlier tick of 5 paise, according to the NSE circular.
The tick size for T+1 settlement securities will also apply to T+0 settlement securities.
In March last year, BSE implemented 1 paisa tick size for stocks below Rs 100. Prior to this, the tick size was 5 paise for stocks above Rs 15.
What Is Tick Size?
Tick size refers to the smallest price difference between the buying and selling price in a market. It is crucial because it determines the minimum price change needed for a trade to occur.
Tick size matters in tick trading, a type of day trading where traders make quick trades over just seconds or minutes. This method relies on small price movements for profit. For a tick trade to happen, the price must change by at least the tick size.
If the tick size is too big, it can be hard to find someone willing to trade at that price. This affects market liquidity and traders' ability to find partners. Larger tick sizes mean higher trading costs. So, choosing the right tick size is important for balancing liquidity and cost considerations.
