Tick Size
Market Microstructure glossary · Limit Order Book Mechanics & Order Routing Logic
Definition
The minimum allowable price increment for quoting or trading a security. Larger tick sizes reduce bid–ask competition; smaller tick sizes enable price improvement but can fragment depth.
Tick Size in plain English
Tick size is simply the smallest amount a price is allowed to move — the 'grid spacing' for prices. In U.S. stocks over $1 that's one cent, so quotes jump $10.00, $10.01, $10.02, never anything in between. The size involves a trade-off: a tiny tick lets buyers and sellers undercut each other by a hair (good for getting a slightly better price), but because so many separate price levels exist, the shares available can get scattered thinly across them; a bigger tick concentrates orders at fewer prices but dulls that penny-by-penny competition. It's like whether a store can price things to the exact cent or must round to the nearest quarter — finer pricing versus simpler, deeper stacks.
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