how is tick size measured 
in modern trading tick sizes are generally in decimals until the early 2000s however u s stock markets expressed tick sizes in fractions of a dollar for most stocks that fraction was one sixteenth so a tick size represented 0 0625 although some stocks had 1 8 for lightly traded stocks and 1 32 tick sizes for more active and liquid issues this ungainly convention originated with the early new york stock exchange which first modeled its measurements on a centuries old spanish trading system that used a base of eight or the number of fingers on a person s two hands minus the thumbs in 2005 the securities and exchange commission sec introduced rule 612 the sub penny rule rule 612 required decimalization with the minimum tick size for stocks over 1 00 as 0 01 and stocks under 1 00 as 0 0001 the sec now requires all u s exchanges to effectively use hundredths which is why the tick size today is one cent for most stocks though the sec has recently experimented with larger tick sizes for some less liquid stocks futures markets typically have a tick size specific to the instrument with 1 minimum tick sizes known as points for instance s p 500 futures contracts which are heavily traded have a tick size of 0 25 this means if say the march contract s current price is 4 553 00 and someone wanted to offer more for it they would have to bid at a minimum 4 553 25 tick size pilot programon oct 3 2016 the sec began a two year pilot program to test the potential benefits of larger tick sizes for stocks with closing prices of 2 or greater market capitalizations of 3 billion or less and consolidated average daily volume of 1 million shares or less the sec separated a sample of small cap securities into one control group and two test groups as part of the test according to the sec each test group included about 400 securities with the rest in the control group the first group in the test used tick sizes of 0 05 although stocks in this group continued to trade at their current price increments the second group also quoted tick sizes of 0 05 and traded only in these increments although it included a small number of exceptions to this general rule the third group was quoted with trades in 0 05 increments although a rule prevented price matching by trading organizations that do not display the best price unless an exception applies securities in the control group continued to trade at 0 01 increments while only a test some retail brokers and traders criticized the study arguing that a move to 0 05 tick sizes only benefited market makers by raising trading margins at the expense of individual investors a white paper on the plan tick size pilot plan and market quality released in january 2018 found that stocks in the test groups increased in spreads and volatility and decreased price efficiency relative to stocks in the control group the exchanges and financial industry regulatory authority submitted to the sec a publicly available joint assessment of the impact of the tick size pilot in july 2018 in the end exchanges did not adopt the large nickel tick size in stocks staying at one penny increments pips and forex quotespips equal 1 100 one basis point or 0 01 the foreign exchange forex market uses a four decimal quoting convention with pips for the tick size for example the eur usd pair may have a 1 1257 bid some forex brokers also offer fractional pip pricing which is to the fifth decimal place for example the above quote could be further specified as 1 12573 there are 10 factional pips to a whole pip representing 1 10 the value of a full pip the value of a pip varies based on the currency pair being traded tick size examplesstocks trader a buys 100 shares of abc stock at 50 per share the tick size is 0 01 in most stocks today the price moves up five ticks from 50 to 50 05 with 100 shares trader a sees a gain as follows 100 0 05 5 00 futures trader b buys one contract of the e mini s p 500 futures at 4 700 00 the tick size in this futures market is 0 25 points and s p 500 futures trade with a multiplier of 50 per point per contract so one tick equals a 12 50 profit or loss per contract suppose the price moves up five ticks from 4 700 00 to 4 701 25 trader b therefore profits as follows 5 12 50 62 50 forex trader c buys 100 000 eur usd at 1 1200 representing one standard lot the pip size is 0 0001 the price moves up five pips from 1 1200 to 1 1205 for 100 000 eur trader c profits as follows 5 0 0001 100 000 50 00 the tick size is the minimum price increment by which an asset s market prices can rise or fall the tick value is the dollar amount of such a change in price using s p 500 e mini futures the tick size is 0 25 while the tick value is 12 50 per tick 