Tick size

The minimum price increment written into an instrument's specification. It fixes the grid the price may sit on: a quote can rest on one increment or the next and nowhere between them. On listed markets it is set by the exchange, sometimes varying by price band so that dearer contracts step in larger amounts, and it is one of the parameters that decides how a market's book looks, because a fine increment spreads resting orders across many levels and a coarse one concentrates them on few.

In foreign exchange the increment and the pip are conventionally different things. A pip is the traditional unit of quotation for a pair, while most price sources now publish an additional decimal, so the smallest movement is a tenth of a pip. That extra digit is called a fractional pip or a point, and it is why the same move is described as a small number of pips in commentary and a much larger number of points on a platform.

The usual confusion is between the increment and the cost of dealing. Tick size says only how finely the price may be expressed. It sets no floor under the spread beyond the arithmetic one that the spread must be a whole number of increments, and it says nothing about the money a movement is worth, which is the separate question answered by tick value. Two instruments with an identical increment can carry entirely different amounts per step.