The price grid
Prices on an exchange move in steps called ticks. For US stocks priced at 1 USD or more, the minimum tick is 0.01 USD (one cent); below 1 USD it is 0.0001 USD. So a quote of 25.375 is not allowed for a stock near 25. The tick size sets the smallest possible bid-ask spread and how much a price must improve to jump ahead of other orders.
Quantity also moves in units. A round lot has traditionally been 100 shares; smaller orders are odd lots. Futures have their own grid: the E-mini S&P 500 moves in ticks of 0.25 index points, each worth 50 × 0.25 = 12.50 USD.
Most exchanges match orders by price-time priority: the best price is filled first, and among orders at the same price, the one that arrived first. Orders at one price form a queue. Improving your price by one tick puts you ahead of everyone at the old price; joining the queue means waiting your turn. Some markets use pro-rata allocation instead, sharing a fill in proportion to size.
- Tick size: the smallest allowed price increment.
- Round lot: the standard trading unit, traditionally 100 shares.
- Price priority: a better price is filled before a worse one.
- Time priority: at the same price, the earlier order is filled first.
- Queue position: how many shares are ahead of your order at your price.
Lab · what's graded
- A valid quote10 pts
- A tick in basis points20 pts
- Queue priority20 pts
- Key terms20 pts
- Large-tick stocks15 pts
- Improving the price15 pts