The National Stock Exchange (NSE) will implement some major changes in its trading adjustment. From June 10, 2024, stocks priced below Rs. 250 per share will have a one paisa tick size. This change aims to improve market price discovery.
“All securities (excluding Exchange Traded Funds) available in ‘EQ’, ‘BE’, ‘BZ’, ‘BO’, ‘RL’, ‘AF’ series (and their corresponding ‘BL’ series as applicable) with security price below Rs 250 will have tick size of Rs 0.01 as against the current tick size Rs 0.05”, said NSE in a circular issued on Monday, May 24, 2024.
What is a Tick Size?
A tick size refers to the smallest price change between bid (buy) and offer (sell) prices. A smaller tick size allows finer price adjustments and improves price discovery accuracy.
For example – Let’s assume a stock has a tick size of Rs. 0.10 and the last traded price (LTP) was Rs. 80, then the possible bid prices would be Rs. 79.90, Rs. 79.80, Rs. 79.70, and so on.
In this case, bid prices like Rs. 79.85 or Rs. 79.92 wouldn’t be valid as they don’t meet the tick size requirement of Rs. 0.10.
Further, the NSE said, “The Exchange shall review the tick size of a security on monthly basis. The closing price on the last trading day of the month in CM Segment shall be used to determine the tick size, which shall be made applicable for the next month”.
Also Read: NSE Suspends Trading in Brightcom Group Shares
The circular also highlights that there will be no alteration in the tick size of stock options despite any adjustments in the tick size of the underlying security in the CM segment and its corresponding stock futures.
This change aims to improve trading efficiency and accuracy in price quoting.
Aligning tick sizes with underlying securities in the CM segment and applying these adjustments to stock futures demonstrates NSE’s dedication to a competitive and efficient trading setting.
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Disclaimer: The above content is for informational purposes only. The 1% News recommends consulting a SEBI-registered investment advisor before making any investment decision.
