The National Stock Exchange (NSE) has decided to make the ‘tick size’ i.e. the minimum price difference for all shares priced below Rs 250 to one paisa from June 10. ‘Tick size’ indicates the minimum price difference between two consecutive bid and offer prices. According to Bhasha news, currently the ‘tick size’ for these shares is five paisa, which will be reduced to one paisa. The purpose of this step is to increase cash and find better value through more accurate price adjustment. NSE said in a circular that the ‘tick size’ of all securities (except exchange-traded funds) available in the series priced below Rs 250 will be Rs 0.01, whereas currently it is Rs 0.05.
Also applicable for T+0 settlement
According to the news, the ‘tick size’ prescribed for securities in T+1 settlement will also be applicable for T+0 settlement (Series T0). Tick size is the smallest increment/decrease of possible fluctuation in price. For example, if the ‘tick size’ of a stock is Rs 0.05, then it can move only in increment/decrease of Rs 0.05.
The smaller tick size helps in better price adjustment and potentially more suitable price discovery. NSE said that the tick size is considered, reviewed and adjusted based on the closing price of the last trading day of the month.
BSE has already reduced
Apart from the changes in the capital market segment, NSE has announced amendments in the futures and options (F&O) segment. According to the circular, futures shares will have the same ‘tick size’ as applicable for securities in the cash market segment from July 8. Also, the amendment in the ‘tick size’ will be applicable for all expiry dates, near-month, mid-month and far month. The Bombay Stock Exchange (BSE) had last year reduced the ‘tick size’ from five paisa to one paisa for shares trading below Rs 100.
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