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. The purpose of a board lot is to avoid "odd lots" and to facilitate easier trading. It's more difficult for a broker to find a buyer for, say, 17 shares, than if everybody agrees to trade in 100 share lots.
BREAKING DOWN Board Lot
For example, a stock exchange might define one board lot as equaling 1,000 shares for stock priced under $1, and 100 shares for shares of 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 lower transaction cost, which investors of all varieties prefer. Although most securities bookkeeping today is done electronically, fractional ownership percentages still poss an administrative burden. As such, economies of scale prefer security lots to come in larger increments.
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, or no less than what is needed.
It is not uncommon for online or discount brokerages to limit users to round lots as part of their service agreements.