The National Stock Exchange of India (NSE) has revised tick sizes for Capital Market (CM) segment, Stock Futures, and Index Futures, effective April 15, 2025. This change will significantly impact algo traders, manual traders, market orders, Market Profile analysis, and Order Flow trading.
1. Revised Tick Size Rules
Capital Market & Stock Futures
| Security Price (₹) | Previous Tick Size (₹) | Revised Tick Size (₹) |
|---|---|---|
| Below 250 | 0.01 | 0.01 (Unchanged) |
| 250 – 1,000 | 0.05 | 0.05 (Unchanged) |
| 1,000 – 5,000 | 0.05 | 0.10 |
| 5,000 – 10,000 | 0.05 | 0.50 |
| 10,000 – 20,000 | 0.05 | 1.00 |
| Above 20,000 | 0.05 | 5.00 |
👉 Stock Futures follow the same tick size as the underlying security.
Index Futures
| Index Level | Previous Tick Size (₹) | Revised Tick Size (₹) |
|---|---|---|
| 0 – 15,000 | 0.05 | 0.05 (Unchanged) |
| 15,000 – 30,000 | 0.05 | 0.10 |
| Above 30,000 | 0.05 | 0.20 |
👉 Options contracts on stocks and indices remain at ₹0.05 tick size.
2. Impact on Algo Trading
A. Stop Loss, Target, and Trailing Stop Adjustments
- Traders who round off stop-loss, target, and trailing stops to the nearest tick must revise their logic.
- Example: A stock at ₹12,000 now moves in ₹1.00 increments instead of ₹0.05, affecting execution precision.
B. Market-Making and Scalping Becomes Tougher
- Larger tick sizes widen bid-ask spreads, reducing scalping opportunities.
- Market makers must adjust liquidity provisioning strategies to align with fewer price levels.
C. Arbitrage Models Need Recalibration
- Since Stock Futures tick sizes mirror CM segment, arbitrage models must recalculate price spreads.
3. Impact on Market Orders & Liquidity in Index Futures (Nifty & Bank Nifty)
A. Impact on Market Orders
Traders using market orders (which execute at the best available price) must be cautious:
✅ Wider tick sizes mean larger price jumps, increasing slippage risk.
✅ Less price granularity in high-priced stocks can lead to larger-than-expected execution gaps.
✅ Market orders in illiquid stocks or during volatile sessions may execute at unfavorable prices.
B. Will Liquidity in Nifty & Bank Nifty Futures be Affected?
- For Nifty & Bank Nifty Futures, the new tick size (₹0.10 and ₹0.20) will consolidate liquidity at fewer price levels.
- Institutional traders may place orders at fewer price points, potentially affecting bid-ask depth.
- Retail traders placing large market orders might experience increased slippage, especially during news events or high volatility.
🔴 High-frequency traders (HFTs) and institutions might shift liquidity, requiring retail traders to be more cautious.
4. How Manual Traders Can Avoid Slippages
✅ Use Limit Orders Instead of Market Orders
- Avoid market orders in high-priced securities and use limit orders to control execution price.
✅ Adjust Order Execution Strategy
- Break large orders into smaller limit orders to reduce execution impact.
- Avoid placing large market orders near economic events or market open/close.
✅ Monitor Order Book Before Placing Orders
- Check bid-ask depth and identify the nearest liquidity points before executing large trades.
✅ Use Stop-Limit Orders Instead of Stop-Market Orders
- Avoid stop-market orders, which can trigger unexpected slippage in high-volatility scenarios.
- Instead, use stop-limit orders with a defined price range.
🚀 Manual traders should switch to limit orders & refine execution strategies to minimize slippage risks.
5. Market Profile & Order Flow Adjustments
A. TPO Chart Adjustments
- Increase tick size settings for TPO charts in stocks priced above ₹5,000.
- Example: A ₹12,000 stock now moves in ₹1.00 steps, impacting TPO structures and value areas.
B. Order Flow & Footprint Charts
- Adjust Renko, Volume Delta, and Footprint settings to match new tick sizes.
- Example: A stock at ₹5,000 now moves in ₹0.50 increments, so Brick Size settings must be updated.
6. Key Takeaways for Traders
✅ Algo traders must update stop-loss, target, and trailing stop strategies for revised tick sizes.
✅ Market orders will face higher slippage, especially in Nifty & Bank Nifty Futures.
✅ Manual traders should shift to limit orders & avoid stop-market orders to prevent unexpected fills.
✅ Market Profile traders must adjust TPO settings for new price increments.
✅ Order Flow traders need to revise Footprint, Renko, and Volume Delta settings.
✅ Monitor NSE’s monthly tick size reviews to stay ahead of future changes.
🚀 First tick size revision takes effect on April 15, 2025—adjust your strategies now!
Final Thoughts
With wider tick sizes, market liquidity shifts, and potential slippage risks, traders must recalibrate execution strategies. Algo traders, manual traders, and institutional players need to adjust their models and execution styles to remain competitive.
📌 Stay prepared, monitor tick changes monthly, and optimize your strategies to minimize impact! 🚀
