Tick sizes apply to which venues?

Tick sizes apply to which venues?

• A. On-order book and non-displayed order book
• B. Off-exchange venues
• C. Only displayed orders
• D. Dark pools

Answer: (A)

Tick size is the smallest price increment allowed for orders that participate in the official price formation. It applies to orders in the on-order book—the visible bids and asks—and to non-displayed orders that still feed into price discovery. Off-exchange venues and dark pools operate outside the main price formation, often with different pricing rules, so they aren’t governed by the standard tick size in the same way. Therefore, tick sizes apply to the on-order book and the non-displayed order book.

Tick size is the smallest price increment allowed for orders that participate in the official price formation. It applies to orders in the on-order book—the visible bids and asks—and to non-displayed orders that still feed into price discovery. Off-exchange venues and dark pools operate outside the main price formation, often with different pricing rules, so they aren’t governed by the standard tick size in the same way. Therefore, tick sizes apply to the on-order book and the non-displayed order book.