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NSE Changed Tick Size For Stocks: The National Stock Exchange (NSE) has announced a significant change in its trading parameters. From June 10, 2024, NSE will introduce a tick size of one paisa for all stocks priced below ₹250 per share. This decision has been informed in a circular issued on May 24, 2024.
This strategic move has been taken to improve price discovery in the market. According to some market participants, this measure reflects the intense competition for market dominance between the NSE and the Bombay Stock Exchange (BSE).
What is tick size and its benefits
Tick size indicates the minimum price difference between two bids and offer price. Tick size set by the exchange curbs large fluctuations in the stock due to small positive and negative events. High volatility is reduced. If the tick size is high then trading becomes expensive, and a low tick size benefits investors.
New tick size will be applicable on these stocks
The new tick size will also apply to ETFs and all securities except EQ, BE, BZ, BO, RL and AF series. Earlier a tick size of 5 paise was applicable to these securities. The tick size will also apply to T+1 and T+0 settlements. Apart from the changes in the capital market segment, NSE has also announced amendments to the futures and options (F&O) segment. The tick size for stock futures will now be linked to the underlying price in the CM segment. This change will be reviewed on a monthly basis, with the tick size being determined using the closing price on the last trading day of the month.
The revised tick size will be applicable to all stock futures expiries, including near-month, mid-month and far-month contracts. Any change in the tick size of the underlying securities and its corresponding stock futures in the CM segment will not result in any change in the tick size of stock options. “Trading members are to note that the tick size applicable for trading of securities will be available in the contract/spread master files,” NSE said.
This change is aimed at improving trading efficiency and accuracy in predicting stock prices. The decision to align tick sizes with the underlying securities in the CM segment and implement these changes in stock futures reflects NSE's commitment to maintaining a competitive and efficient trading environment.
