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.

RELATED TERMS
  1. Lot

    A lot is the standard number of units in a trading security. ...
  2. Mixed Lot

    A type of order for a number of securities that is not a round ...
  3. Board Broker System

    A system used by commodity exchanges, in which agents are assigned ...
  4. Odd Lotter

    An individual investor who buys securities, usually stocks, in ...
  5. Lot Relief Method

    The lot relief method is one way of computing the cost basis ...
  6. Fractional Share

    A share of equity that is less than one full share. Fractional ...
Related Articles
  1. Trading

    The Odd Lot Theory: Betting That Small Investors Are Wrong

    The odd lot theory is a largely discredited proposition that small investors are usually wrong and that doing the exact opposite will yield above-average returns.
  2. Tech

    The Basics Of Currency Trading

    Trading in the currency market isn't easy. We tell you what you need to know before starting.
  3. Trading

    Forex Basics: Setting Up An Account

    The line between profitable forex trading and ending up in the red may be as simple as choosing the right account.
  4. Investing

    Picking your first broker

    If you're a rookie investor, choosing a broker may be your first big investment decision. Learn more on whether you should you go with a full-service broker or a discount broker.
  5. Investing

    Big Lots Continues Its Earnings Streak

    The discount goods space has been one of the few brick-and-mortar segments to remain resilient in the face the of the retail apocalypse, because whatever other trends may shift, consumers still ...
  6. Managing Wealth

    How To Become A Corporate Board Member

    We look at how corporate boards are constructed, and how investors can get involved.
  7. Insights

    A Breakdown on How the Stock Market Works

    Learn what it means to own stocks and shares, why shares exist, and how you buy and sell them.
  8. Investing

    Discount Broker

    A stockbroker who carries out buy and sell orders at a reduced commission compared to a full-service broker, but provides no investment advice.
  9. Trading

    How To Pay Your Forex Broker

    Three types of commissions are used in this market. Learn how to get the best deal.
RELATED FAQS
  1. How much more will it cost me to buy an odd lot of shares?

    A round lot is a predetermined number of shares of stock - usually 100 shares, while an odd lot refers to any number of shares ... Read Answer >>
  2. What is the cost of a share purchase?

    Find out how the total price of a share purchase is dictated by the current stock price and the fees the brokerage company ... Read Answer >>
  3. How Can Trading Volume Exceed Shares Outstanding?

    The number of shares traded can be greater than the number of outstanding shares, but it's rare. Read Answer >>
Hot Definitions
  1. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  2. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  3. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  4. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  5. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
  6. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
Trading Center