Tick Size and Its Effect on Displayed Liquidity
The minimum price increment shapes how orders queue, how wide spreads can be, and how deep a book appears. Why tick size belongs in every liquidity comparison.
Every order book has a minimum price increment — the tick. It is easy to treat as an administrative detail, but tick size has first-order effects on market quality. It sets a floor on the quoted spread, determines how many distinct price levels exist near the mid, and influences whether participants compete on price or on queue position.
Large ticks: long queues
When the tick is large relative to the asset’s price, the spread is frequently pinned at one tick. Participants cannot improve price, so they compete for time priority, and a large amount of quantity accumulates at the best bid and ask. The book looks deep at the touch, but getting filled as a passive order requires waiting in a long queue.
Small ticks: thin levels
When the tick is small, participants can undercut each other by trivial amounts. Liquidity fragments across many closely spaced levels, and the quantity at any single price may be small. The best bid and ask look thin even when substantial quantity rests within a few basis points.
Venues periodically change tick sizes as prices move. Our instrument records version tick size by effective date, so that a change in apparent depth caused by a tick change is not mistaken for a change in liquidity.
This publication is provided for informational purposes only and does not constitute investment, legal, or tax advice, or an offer or solicitation to buy or sell any asset. Live figures are computed from third-party public market data and may be delayed, incomplete, or inaccurate.
