Board Lot Definition

What is flat ground?

A board lot is a standardized number of actions defined by an exchange as a trading unit. In most cases, this means 100 shares.

A board lot is what the exchange determines to be a round ground. The purpose of a regular lot is to minimize trades”odd lots” and to facilitate trading. It is more difficult for a broker to find a buyer for, say, 17 shares, if everyone agrees to trade lots of 100 shares. With the advent of efficient online trading and fractional shareshowever, odd lot trading is less of a problem than it has been in the past.

Key points to remember

  • A board lot is what an exchange determines as its standard trading unit for round lots.
  • The idea behind even lots is to facilitate more efficient trading by defining blocks of stocks to trade, instead of having a random assortment of odd lots traded.
  • Board lots can lead to tighter spreads and more liquidity, although e-commerce and online brokers have reduced the need for board lots.

Understanding Board Lots

The size of a regular lot varies. An exchange may define a board lot as equal to 1,000 shares for stocks priced below $1 and 100 shares for stocks priced above $1. The thought is that standardization increase liquiditythereby reducing spreads and making the market more efficient for everyone.

Tighter spreads and greater liquidity leads to lower transaction costs, something investors of all kinds prefer. Although most securities accounting today is done electronically, joint ownership percentages are still an administrative burden. As such, economies of scale prefer security bundles to be provided in larger increments.

On some trading platforms, the board lot is delimited in units of 100 shares. On other exchanges, the board lot size can be much higher. For example, the standard plank lot at Hong
Kong Exchanges and Clearing Limited
(HKeX) went from 8,000 shares to 24,000 shares in
February 2019.

Definitely cover applications or other more advanced trading strategies, buying or selling in increments of 100 may be suboptimal; in these cases, it may be wise for an investor to use a full-service broker to compose the right amount of securities, no more and no less than what is necessary.

It is not uncommon for the voice or discount brokerage limit users to roundups as part of their service agreements. Online brokers and e-commerce, however, have steadily reduced the inefficiency and costs associated with odd lots. As a result, the need for plank bundles has decreased significantly over the past decade.

Example of regular batches

Unlike the US, where board lot sizes are generally standardized at 100 shares, Toronto Stock Exchange (TSX/TMX) has varying board lot sizes that depend on the price of the security. They are defined in the Universal Market Integrity Rules (UMIR) that govern business practices in Canada.

The guidelines are as follows: If the trading price per unit is less than $0.10, the board lot size is 1,000 units. If the trading price per unit is $0.10 to $0.99, the regular lot size is 500 units. When the trading price per unit is $1.00 or more, the board lot size is 100 units.

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