The National Stock Exchange (NSE) has revised tick sizes for stocks, indices and their respective futures and options (F&O) contracts. Based on the closing price of stocks on March 28, the changes come into effect from Tuesday.
What is tick size?
Tick size refers to the minimum prime movement by which the price of a security, index, or derivative can change if the stock market goes up or down. A smaller tick size means that the liquidity and the price efficiency of a stock can be enhanced, while a larger tick size means less volatility and speculative trading.
For example, if a stock has a tick size of Rs 0.05, then the price can only go up from Rs 100.00 to Rs 100.05, and not Rs 100.02.
Revised tick size as per NSE
- Stocks priced below Rs 250 – Tick size Rs 0.o1
- Stocks priced between Rs 251 and Rs 1,000 – Tick size Rs 0.05
- Stocks priced between Rs 1,001 and Rs 5,000 – Tick size revised from Rs 0.05 to Rs 0.10
- Stocks priced between Rs 5,001 and Rs 10,000 – Tick size revised from Rs 0.05 to Rs 0.50
- Stocks priced between Rs 10,001 and Rs 20,000 – Tick size revised from Rs 0.05 to Rs 1.00
- Stocks priced above Rs 20,001 – Tick size revised from Rs 0.05 to Rs 5.00
The modifications made in the tick size as per NSE will apply to both the cash market (CM) and the stock derivatives (F&O) segment. The revisions in tick size will have an impact on price discovery, leading to less price fluctuations and improved trend qualities.
Further, higher tick sizes for certain stocks will lead to more meaningful price moves, causing better rewards for investors.
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