Tick Sizes and Lot Sizes
Tick sizes set the minimum price step and lot sizes set the minimum trade size. Learn how both are chosen, how they shape spreads and queues and recent rule changes.
Every market has two basic design choices that quietly shape how trading works: the tick size, the smallest allowed price change, and the lot size, the standard or minimum trading quantity. They look like technical details, but they influence spreads, liquidity, queue lengths, trading costs and even which traders thrive in a market.
Tick size: the price grid#
The tick size defines the grid of allowed prices. A one cent tick means a stock can trade at $50.00 or $50.01 but not in between. See Ticks and Tick Size for examples across markets.
Why tick size matters#
| If the tick is large relative to price | If the tick is small relative to price |
|---|---|
| Spreads are forced to at least one wide tick | Spreads can be very narrow |
| Long queues form at each price | Short queues spread across many prices |
| Queue position becomes valuable | Price improvement by tiny amounts is easy |
| Market makers earn more per trade | Competition squeezes market maker profits |
A one cent tick is 0.1% of a $10 stock but only 0.002% of a $500 stock. For very liquid, low priced stocks, the one cent minimum can be wider than the spread would naturally be, creating long queues. For high priced stocks, prices can move in tiny steps relative to their value.
Tick size rules and changes#
- US stocks: Regulation NMS has long set a minimum of one cent for stocks priced $1 or more. In 2024, the SEC adopted amendments allowing a half cent tick for stocks with consistently very tight spreads.
- The Tick Size Pilot (2016 to 2018) tested wider five cent ticks for some small US stocks to see if they would improve liquidity; results were mixed, with wider spreads and higher costs for many investors.
- Decimalisation: US stocks were quoted in fractions such as 1/16 of a dollar until 2001, when markets switched to decimals, which narrowed spreads dramatically.
- Europe uses tick size tables that vary with price and liquidity under MiFID II.
- Futures exchanges set ticks per contract, such as 0.25 index points for the E-mini S&P 500.
Lot size: the quantity grid#
The lot size is the standard unit of trading.
| Market | Lot conventions |
|---|---|
| US stocks | 100 shares is a round lot; fewer is an odd lot; fractional shares exist at many brokers |
| Forex | Standard 100,000 units, mini 10,000, micro 1,000. See Lots: Standard, Mini and Micro |
| Futures | One contract is the minimum; micro contracts offer smaller exposure |
| Options | One contract, usually 100 shares |
| Crypto | Minimum order sizes set by each exchange, often tiny fractions of a coin |
Why lot size matters#
- Accessibility: large minimum sizes keep small traders out; micro lots and fractional shares let them in.
- Quote display: in US stocks, odd lot orders were historically not reflected in the official best bid and offer. Recent SEC rules redefined round lots for higher priced stocks so that the displayed quote better reflects available prices.
- Position sizing: large lots make precise risk control harder for small accounts.
How design choices affect you#
- Expect long queues in liquid low priced stocks; price improvement or marketable orders may be needed to get filled. See Fill Probability and Queue Position.
- Spread costs are higher as a percentage on low priced stocks with a one cent tick.
- Use micro contracts and lots to size positions properly.
- Know the tick value of every futures contract you trade. See Tick Size and Tick Value.
Frequently asked questions#
What is a round lot?#
The standard trading unit, traditionally 100 shares for US stocks. Orders for fewer shares are odd lots.
Why do tick sizes matter?#
They set the minimum spread and shape how orders queue, affecting costs and how easily you get filled.
Can I trade fractions of a share?#
Many brokers offer fractional shares by pooling orders internally, though exchanges themselves trade whole shares.
Sources#
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