Tick size is the smallest increment by which the price of a financial instrument can move on a trading venue. If a share has a tick size of one cent, orders can be entered at 10.00, 10.01 or 10.02 but not at 10.005. Every price in the order book sits on this grid, so the tick size determines the minimum possible bid-ask spread and the cost of stepping ahead of another order in the queue.
Tick sizes are set by exchanges or by regulators and apply to shares, bonds, futures, options, currencies and crypto assets alike. They are a core variable in market microstructure, because a seemingly technical number shapes how liquidity is supplied, how profitable it is to act as a market maker and how much investors pay to trade. A related term, tick value, is the amount of money gained or lost per contract when a future moves by one tick.
How tick sizes are set
There are two broad designs. A uniform tick applies the same increment to every instrument above a price floor, as in the United States, where shares priced at one dollar or more are quoted in one-cent steps. A tick size table, or step schedule, makes the increment larger as the price rises, so that the tick stays within a rough range as a percentage of the price. Many European and Asian markets use tables of this kind.
In futures markets each contract specification states the tick and its value. A widely traded equity index future, for example, moves in steps of 0.25 index points, and with a contract multiplier of 50 dollars per point each tick is worth 12.50 dollars per contract.
What matters economically is the relative tick: the tick divided by the price. A one-cent tick is 0.2% of a 5-dollar share but only 0.002% of a 500-dollar share. A share is called tick-constrained when its natural spread would be narrower than one tick, so that the quoted spread is stuck at the minimum.
Effects on trading
The choice of tick size involves a trade-off:
- Large ticks. The spread cannot fall below one tick, so investors who cross it pay more. In return, more shares are displayed at each price, which increases visible order book depth, and time priority matters because traders cannot cheaply jump the queue. Wide ticks reward speed in joining the queue and can push trading to venues that offer prices between the ticks.
- Small ticks. Spreads can narrow, lowering costs for small orders. But liquidity is spread thinly across many price levels, quotes change more often, and a trader can gain priority over a resting limit order by improving the price by a trivial amount, which discourages others from displaying size.
Tick size also interacts with high-frequency trading and with off-exchange execution. Where the tick is wide relative to the natural spread, venues such as a systematic internaliser or wholesale market maker can attract orders by offering slight price improvement inside the quoted spread, a point that has featured in debates about payment for order flow.
History and regulation
US shares were long quoted in fractions of a dollar, first eighths and then sixteenths. Decimal pricing was phased in and completed in 2001, reducing the minimum increment to one cent, and quoted spreads fell sharply. The Securities and Exchange Commission later fixed the one-cent minimum for shares priced at or above one dollar in its market structure rules. Concern that small ticks had made it unattractive to trade and research smaller companies led to a pilot programme, run from 2016 to 2018, that widened the tick to five cents for a sample of small-capitalisation shares; the results did not show clear benefits, and the programme was not extended. In 2024 the SEC adopted amendments introducing a half-cent increment for certain tick-constrained shares, but it has twice postponed the compliance date, most recently to November 2027, so the one-cent minimum was still in force in late 2026.
In the European Union, MiFID II introduced a harmonised tick size regime in 2018. Trading venues must apply minimum ticks to shares, depositary receipts and exchange-traded funds based on two factors, the price of the instrument and its liquidity, measured by the average daily number of transactions. The aim was to end competition between venues to offer ever-smaller ticks. The regime was later extended to systematic internalisers' quotes.
Tick size in other markets
In currency markets the conventional unit is the pip, with many platforms quoting fractional pips. Bond markets have their own conventions; US Treasury securities are traditionally quoted in thirty-seconds of a point. On crypto exchanges, each trading pair has a venue-defined price increment alongside a minimum order quantity, and these can differ widely between venues for the same asset, which complicates order routing and price comparison across a market already affected by liquidity fragmentation.