Board Lot: What it is, How it Works, Examples

By
Adam Hayes
Full Bio

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

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Updated August 12, 2022
Reviewed by Charles Potters
Fact checked by Kirsten Rohrs Schmitt

What Is a Board Lot?

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

A board lot is what the exchange determines to be a round lot. The purpose of a board lot is to minimize trading "odd lots" and to facilitate easier trading. It's more difficult for a broker to find a buyer for, say, 17 shares, if everybody agrees to trade in 100 share lots. With the advent of efficient online trading and fractional shares, however, odd lot trading is less of an issue than it has been in the past.

Key Takeaways

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

Understanding Board Lots

The size of a board lot will vary. A stock exchange might define one board lot as equaling 1,000 shares for stocks priced under $1, and 100 shares for shares valued at more than $1. The thinking is that standardization increases liquidity, thus lowering spreads and making the market more efficient for everybody.

Tighter spreads and more liquidity leads to lower transaction cost, which investors of all varieties prefer. Although most securities bookkeeping today is done electronically, fractional ownership percentages still pose an administrative burden. As such, economies of scale prefer security lots to come in larger increments.

At some trading venues, the board lot is delineated in units of 100 shares. On other exchanges, the board lot size can be much higher. For instance, the standard board lot at the Hong
Kong Exchanges and Clearing Limited (HKeX) was changed from 8,000 shares to 24,000 shares in
Feb. 2019.

For certain hedging applications or other more advanced trading strategies, buying or selling in increments of 100 might be sub-optimal; in these instances, it might make sense for an investor to use a full-service broker to dial in the right amount of securities—no more and no less than what is needed.

It is not uncommon for voice or discount brokerages to limit users to round lots as part of their service agreements. Online brokerages and electronic trading, however, have steadily reduced the inefficiency and cost associated with odd lots. As a result, the need for board lots has decreased dramatically over the past decade.

Example of Board Lots

Unlike the U.S., where board lot sizes are typically standardized to 100 shares, the Toronto Stock Exchange (TSX/TMX) has variable board lot sizes that are dependent on the price of the security. They are defined in the Universal Market Integrity Rules (UMIR) that govern trading 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 board 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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  1. Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong. "Change in Board Lot Size."

  2. TMX. "TMX Order Types and Functionality Guide," Page 42.

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