The National Stock Exchange (NSE) has announced a revision in tick sizes for stocks, indices, and their respective futures and options (F&O) contracts. These changes, aimed at improving liquidity and market efficiency, will come into effect from April 15, based on closing prices as of March 28.
What is Tick Size?
Tick size refers to the minimum price movement by which a security, index, or derivative contract can change. It determines the smallest increment in which buyers and sellers can quote prices. A smaller tick size enhances liquidity and price efficiency, while a larger tick size helps reduce volatility and speculative trading.
Revised Tick Size for Stocks
The tick size for stocks will now vary based on their price bands:
- Below ₹250 – Tick size remains 0.01
- ₹251 – ₹1,000 – Tick size remains 0.05
- ₹1,001 – ₹5,000 – Tick size increases from 0.05 to 0.10
- ₹5,001 – ₹10,000 – Tick size increases from 0.05 to 0.50
- ₹10,001 – ₹20,000 – Tick size increases from 0.05 to 1.00
- Above ₹20,001 – Tick size increases from 0.05 to 5.00
These modifications will be applicable to both the cash market (CM) and stock derivatives (F&O) segment.
Tick Size Adjustments for Indices and F&O Contracts
Similarly, the tick size for indices and their corresponding F&O contracts has been revised:
- Below 15,000 – Tick size remains 0.05
- 15,001 – 30,000 – Tick size increases from 0.05 to 0.10
- Above 30,000 – Tick size increases from 0.05 to 0.20
Also Read: Tata group stock jumps after receiving ₹123.45 Cr from Govt under PLI scheme
Impact on Traders and Market Efficiency
The revised tick size framework is expected to influence trading strategies, liquidity, and price discovery in the market.
- Price Stability – A larger tick size can help prevent excessive price fluctuations and improve the overall market order book structure.
- Liquidity Management – Lower tick sizes remain useful for stocks with smaller price movements, while higher tick sizes stabilize prices of expensive stocks.
- Market Efficiency – The NSE aims to enhance market depth and trading efficiency by adjusting tick sizes based on price bands.
With these changes set to take effect from April 15, traders and investors need to reassess their strategies to adapt to the new tick size framework. The move is expected to bring greater stability and efficiency to stock and derivative trading in India.
Disclaimer: The above article is written for educational purposes, and the companies’ data mentioned in the article may change with respect to time. The securities quoted are exemplary and are not recommendatory.
