Board lot

Board lot
See also
Short call option Span margin Gamma hedging Decline ratio Hedge fund Long put Auction market Unit trust Going price

Board lot is the number of shares that are sold in package. Board lots make trade easier for brokers. For low value shares board lots are bigger, e.g. for shares less than €1 board lot can be 1000 shares. For high value shares board lots are smaller, e.g. for shares more than €10 it can be 10 shares.

The board lot helps decrease transaction costs. It also removes very small investors from the market. If the board lot is too big, investor can ask broker for help. Broker can find several investors that will buy one board lot.

Example board lot from Philippines Stock Exchange:

Price in pesos	Board lot
0.0001 to 0.0099	1,000,000
0.010 to 0.049	100,000
0.050 to 0.249	10,000
0.250 to 0.495	10,000
0.50 to 4.99	1,000
5.00 to 9.99	100
10.00 to 19.98	100
20.00 to 49.95	100
50.00 to 99.95	10
100.00 to 199.90	10
200.00 to 499.80	10
500.00 to 999.50	10
1,000 to 1,999	5
2,000 to 4,998	5
5,000 to UP	5

Board lot usage

Board lot is commonly used in companies to facilitate trading of their shares on a stock exchange. When a company first goes public, it will typically issue a certain number of shares and list them on an exchange. These shares can then be bought and sold by investors on the exchange. The board lot system is used to standardize the number of shares that are traded in a single transaction, making it easier for buyers and sellers to find each other and complete a trade.

For example, a company may have issued 1 million shares and listed them on an exchange with a board lot size of 100 shares. This means that when an investor wants to buy shares of the company, they must buy at least 100 shares at a time. Similarly, when an investor wants to sell shares of the company, they must sell at least 100 shares at a time. This helps to ensure that there is a consistent level of demand for the shares and that trades can be executed more efficiently.

Additionally, companies can use the board lot system to limit small investors participation in the company, as well as to reduce the transaction costs by limiting the number of times shares are traded.

Summary

A board lot, also known as a round lot, is a standardized number of shares that are traded on a stock exchange. The size of a board lot can vary depending on the stock being traded and the stock exchange. For example, on some exchanges, a board lot for shares valued at less than $1 may be 1,000 shares, while for shares valued at more than $10 it may be as low as 10 shares. This system helps to make trading more efficient for brokers and reduces transaction costs. It also has the effect of limiting the participation of very small investors in the market, as they may not be able to afford to purchase a full board lot on their own. In such cases, investors can seek the assistance of a broker who can help them find other investors to purchase a full board lot together.

References

• Travlos, N. G., Trigeorgis, L., & Vafeas, N. (2015). Shareholder wealth effects of dividend policy changes in an emerging stock market: The case of Cyprus.