Tick is the smallest possible movement, up or down, in the price of a financial asset. Until the end of the 1990s, the system used in the United States to determine the tick was through the use of fractions of 1/8, which was most likely introduced from the traditional predecimal division of the British pound into quarters and eighths. Currently, the shares negotiated on the New York Stock Exchange are negotiated with movements of $0.01 instead of the system using fractions.
In some countries, the size of the tick is determined on the basis of the price level of the share, although the common way is a single value for all the securities negotiated. Although the size of the tick in a market may be nominally fixed, a company can influence the percentage of the price of its securities that it represents, modifying the number of securities negotiated by means of splits or share repurchases.
In this method, the obligatory size of the ticks can describe a major percentage of variation in the prices of the securities between the different markets. In the specific case of the adoption of the decimal system in the United States, Dyl et al. (2002) found that it led to lower prices (due to the splits) for the securities, without this leading to a substantial change in the volume negotiated in monetary terms.
In some countries, the size of the tick is determined on the basis of the price level of the share, although the common way is a single value for all the securities negotiated. Although the size of the tick in a market may be nominally fixed, a company can influence the percentage of the price of its securities that it represents, modifying the number of securities negotiated by means of splits or share repurchases.
In this method, the obligatory size of the ticks can describe a major percentage of variation in the prices of the securities between the different markets. In the specific case of the adoption of the decimal system in the United States, Dyl et al. (2002) found that it led to lower prices (due to the splits) for the securities, without this leading to a substantial change in the volume negotiated in monetary terms.
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