NSE reduces tick size for select stocks to boost liquidity

New Delhi: The National Stock Exchange (NSE) has decided to introduce one paisa tick size for all stocks priced below Rs 250 from June 10, in a bid to enhance liquidity and improve price discovery by allowing for more precise price adjustments.

Presently, the tick size for these stocks is five paise, which will be reduced to one paisa.

"All securities (excluding exchange-traded funds) available in EQ, BE, BZ, BO, RL and AF series with security price below Rs 250 will have a tick size of Rs 0.01 as against the current tick size Rs 0.05. The tick size determined for securities in T+1 settlement will also be applicable for T+0 settlement (series T0)," NSE said in a circular.

Tick size is the minimum price increment between consecutive bid (buy) and offer (sell) prices. A smaller tick size allows for finer price adjustments and potentially more precise price discovery.

For instance, if a stock has a tick size of Rs 0.10 and the last traded price (LTP) was Rs 50, the next possible bid prices would be Rs 49.90, Rs 49.80, Rs 49.70 and so on. In this case, bid prices like Rs 49.85 or Rs 49.92 are not allowed, as they don't meet the Rs 0.10 tick size requirement.

The exchange said that tick sizes will be subject to review and adjustments every month, based on the closing price of the last trading day of the month.

In addition to changes in the Capital Market (CM) segment, the NSE has announced revisions in the Futures & Options (F&O) segment.

The exchange said that the stock futures will have the same tick size as applicable for securities in the cash market segment from July 8. Further, revisions in tick size will be applicable for all expiries -- Near-Month, Middle Month and Far-Month.

Last year, rival bourse BSE lowered the tick size for scrips trading below Rs 100 to 1 paisa from 5 paise.