Tick Size
The minimum price increment by which the price of a security can move up or down in a given market.
What is Tick Size?
Tick size is the smallest allowable price movement for a traded security in a given market. For most US stocks priced above $1.00, the standard tick size is $0.01 (one cent) since the SEC's decimalization mandate in 2001. Futures, options, and foreign exchange markets have their own tick sizes that vary by contract and exchange. Tick size affects market liquidity and bid-ask spreads: smaller ticks allow finer price granularity and can compress spreads, while larger ticks may improve market maker profitability and incentivize liquidity provision. The SEC's 2016 Tick Size Pilot Program tested wider tick sizes for small-cap stocks to assess the effect on trading activity and market quality.
Example
A stock trading at $50.00 with a tick size of $0.01 can next trade at $50.01 or $49.99. An E-mini S&P 500 futures contract has a tick size of 0.25 index points, worth $12.50 per contract. If the index moves from 5,000.00 to 5,000.25, that one-tick move generates a $12.50 profit or loss per contract.
Source: SEC — Tick Size Pilot Program