Tick size is quite relevant in the stock market context. Generally, tick size reflects the minimum price change among different bids and offer prices of a traded security on an exchange platform. The main focal point of the article will be on Tick Size and Tick Value. Apart from this, we will describe NSE, BSE tick size separately.
What is Tick Size and Tick Value?
A minimum price fluctuation, known as “Tick” or in simple words, Tick size is the minimum gap between two consecutive prices (bids and offer prices). The smallest price movement of security is called the tick size. Depending on the asset being trading on an exchange, each tick of movement is worth a specific amount of money, known as Tick Value.
NSE (National Stock Exchange) Tick Size
In NSE, the minimum amount that shares can move higher or lower is Rs. 0.05. This means the tick size is 5 paise. Suppose, last traded price of a stock is 100, the next 5 bid prices of the stock should be Rs 99.95, Rs 99.90, Rs 99.85, Rs 99.80 and Rs 99.75. Here, the bid price cannot be 99.87 or 99.94.
BSE (Bombay Stock Exchange) Tick Size
In Bombay Stock exchange also the least moving amount (higher and lower) is Rs. 0.05 paisa. So, the tick size is 5. For example, Reliance is Rs.1330.90, so the next 5 bid will be Rs.1330.85, Rs.1330.80 and so on.
Commodity Tick Size
Here, the list of all commodities is given along with the tick size. As you can see maximum commodities belongs to the tick size 0.05 and 1. Few of them has 0.25 tick size. This indicates each commodity has a different capability of minimum price change.
Currency Tick Size
The above attachment is taken from the NSE site. It shows futures and options INR pairs. As it reflects the Tick size for all INR is Rs.0.25. In all the segments whether it USDINR, EURINR, GBPINR, JPYINR.
Importance of Tick size
Generally, stock exchange determines the tick size, based on the type of underlying security. The importance of Tick size is given below:
- In the financial market, every bit of price is important. Especially for scalping traders. In this point high and low tick price matters.
These are some of the basic concepts regarding tick size and tick value in the financial market.