Tick size

Tick size is the smallest allowed price increment for an instrument, set by exchange rules. US stocks above $1 tick at $0.01, penny stocks at $0.0001, most forex pairs at 1 pip (0.0001), E-mini S&P 500 futures at $0.25. Tick size determines the finest possible bid-ask spread — if the tick is $0.01, the minimum spread is also $0.01. It also prevents manipulation by "pennying": jumping the queue with microscopic price improvements.