In financial markets, a tick size is the smallest increment (tick) by which the price of a stock The stock or capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors. Stock is distinct from the property and the assets of a business which may fluctuate in, futures contract In finance, a futures contract is a standardized contract between two parties to buy or sell a specified asset of standardized quantity and quality at a specified future date at a price agreed today . The contracts are traded on a futures exchange. Futures contracts are not "direct" securities like stocks, bonds, rights or warrants. They or other exchange-traded instrument can move.
An instrument price is always a rational number and the tick sizes determine which numbers are permissible for a given instrument and exchange.
Tick sizes can be fixed (e.g., USD 0.01) or vary according to the current price (common in European markets) with larger increments at higher prices. Heavily-traded stocks are given smaller tick sizes.
In Europe, Mifid has resulted in a variety of multilateral trading facilities with distinct tick size regimes for the same stocks. These differences mean that order routing systems must be aware of every MTF's tick size regime and adjust outgoing orders accordingly. There is now an industry effort underway to harmonise tick sizes.[1]
References
- ^ "BATS Europe Newsletter - 10th June 2009". BATS Europe. 2009. http://www.batstrading.co.uk/resources/newsletters/BATS_Europe_Newsletter_0609.pdf. Retrieved 2009-06-26.
Categories: Finance
