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TSE to reduce tick sizes for certain stocks

Kyodo

Tokyo Stock Exchange Inc. will reduce tick sizes next Tuesday for certain major issues on the first section to make trading easier and increase volume.

The bourse operator previously reduced tick sizes, the smallest increment by which a stock can move, for certain expensive stocks in January. The latest step will see tick sizes drop for lower-priced Topix 100 issues.

For shares priced from over ¥1,000 to ¥5,000, the minimum increment will be reduced from ¥1 to ¥0.5, while for shares priced up to ¥1,000 the tick will be narrowed to ¥0.1.

As of the end of Monday trading, the prices of shares in toiletries maker Kao Corp. and plant engineering company JGC Corp. fell into the ¥0.5 tick size category, while for shares in trading house Marubeni Corp. and electronics maker Toshiba Corp. the tick size was ¥0.1.

Thanks to the change, investors seeking to buy shares by bidding slightly above market price, say ¥200, may bid ¥200.10 instead of ¥201.

In this scenario, an investor would need a minimum of ¥100,050 to acquire 500 shares of the company instead of ¥100,500.

Seiji Arai, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co., said the change “will increase choices when making bids and help investors to trade stocks under desirable conditions.”

Arai, however, added that for individual investors seeking to profit from short-term price movements, the tick size reduction could narrow their profit margins.