NSE: War of small ticks: NSE to launch 1 paisa spread for stocks below Rs 250

Mumbai: The competition between India’s two major stock exchanges, the National Stock Exchange (NSE) and BSE, for market share continues to intensify. The NSE will introduce a 1 paisa tick size for all stocks below ₹250 starting June 10. Tick size is the incremental price at which a stock can trade.

The 1 paisa tick size, which is the minimum price change between bid and offer prices, was implemented by the BSE in March last year for stocks below ₹100. Previously, the tick size for all stocks above ₹15 was 5 paise. Brokers said the move is expected to improve liquidity and price discovery as narrower tick sizes will encourage traders to implement more trading strategies.

Tick size is the minimum price difference that must exist at all times between consecutive bid and offer prices. For example, if a stock has a tick size of ₹0.05 and the last traded price (LTP) was ₹100, then the next five best bid prices for the stock would be ₹99.95, ₹99.90, ₹99.85, ₹99.80, and ₹99.75. In this instance, the bid price cannot be ₹99.87, as it does not meet the tick size requirement of ₹0.05.

In a circular, the NSE announced that all securities, excluding exchange-traded funds, with a price below ₹250 will have a tick size of ₹0.01, down from the current ₹0.05.

The exchange will review the tick size of each security on a monthly basis, using the closing price on the last trading day of the month to determine the applicable tick size for the following month. The stock futures will also have the same tick size as applicable for underlying security in the cash market segment.Some brokers said the change in tick size by the NSE is to make price moves more uniform with BSE, while a few others indicated it was an attempt to prevent the loss of market share by NSE. In the cash market, BSE’s market share has inched up from 7% in 2023 to 8% in 2024 based on the average daily turnover. However, its market share in the F&O segment has risen substantially. The daily average turnover of the F&O segment, which was about ₹16 lakh crore in 2023, has increased to ₹78 lakh crore in 2024. The market share in the F&O segment is now 17%, based on the average daily turnover, compared to 5.3% in 2023.