The National Stock Exchange (NSE) has announced to introduce of one paisa tick for all stocks below ₹250.
This move to reduce tick size or the minimum price movement possible – is aimed at improving liquidity in the small ticket priced counters and improving fair price discovery in them.
Effective June 10, the tick size for the cash segment and their corresponding futures will be reduced from the current 5 paisa to one paisa.
Tick size refers to the least possible reduction or increase in stock price. For instance, if the share is trading at ₹100, the next possible level for buying it would now be ₹100.01 instead of ₹100.05 which is followed currently.
All securities except ETFs under EQ, BE, BZ, BO, RL and AF series will experience a change in tick size from the earlier tick of 5 paise, according to the circular.
This move by NSE comes a year after the BSE changed the tick size to one paisa for stocks below ₹100. BSE took the step in March last year a few months before the relaunch of its index derivatives in May.
Expert opinion on NSE’s move
“By aligning the tick size with the underlying security prices, NSE is fostering a more competitive trading environment. This change will facilitate tighter spreads and encourage active market making, which is beneficial for both retail and institutional investors,” said Tejas Khoday, Co-founder & CEO, FYERS.
“With current tick sizes, low-priced stocks might experience larger jumps in price due to limited increments. Lower tick sizes can smoothen price movements, leading to a more accurate reflection of underlying value,” said Sarvjeet Singh Virk, MD and Co-Founder, Shoonya by Finvasia.
“This strategic move is set to benefit day traders, high-frequency traders, market makers, and brokers, who rely on minimal spreads and high liquidity for their trading strategies. By fostering a more precise and liquid market environment, the NSE continues to strengthen its position as a leading exchange in the global financial landscape,” said Anshul Jain, Head of Research, Lakshmishree Investments and Securities.
