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Tick size

The smallest price increment a futures contract can trade in, set by the exchange rather than by the market.

Tick size is a rule, not a habit. Orders at prices between ticks are rejected. The exchange chooses it to balance tight bid-ask-spreads against a usably deep order-book: too fine and depth fragments, too coarse and every trade pays a wide spread.

Many products use a different tick for intramarket-spreads than for outrights, so a calendar spread can trade at increments the outright legs cannot.

Example: ES ticks in 0.25 index points, gc in $0.10, zn in half of 1/32nd of a point, corn in 1/4 cent. Multiply by the contract-multiplier and all of them land between $6.25 and $12.50 per tick.

Related: tick-value, contract-multiplier, bid-ask-spread, intramarket-spread, tick

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Bid-ask spread in an order bookSell orders stacked above buy orders with a gap between the best of each.SELLERS (asks)50.0690050.051,40050.0460050.011,10050.002,30049.99800spread = 0.03BUYERS (bids)
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.

Educational only, not advice. Spotted an error? Post in Site Feedback.