Notation jump

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The price jump (also tick, tick size , English : tick size ) is the smallest possible price change in a security price on spot or futures exchanges . The tick size is on the respective stock exchange fixed and can the type of security and the current price vary.

Unit-quoted securities

The jump in quoted securities, i.e. stocks , warrants , subscription rights , etc., is usually set to the smallest available currency denomination, i.e. 0.01 euros (one euro cent ) on euro-listed stock exchanges or 0.01 USD (one penny ) in dollars -listed exchanges. If the price of a unit-quoted security falls below a certain threshold, the price jump is reduced. For example, the price jump in floor trading on the Frankfurt Stock Exchange is reduced to jumps of 0.001 euros (tenth of a euro cent) when the price falls below 0.25 euros.

On the London Stock Exchange , the price jump is set dynamically using a matrix (“dynamic tick size matrix”). When an order to buy or sell shares is received, the price jump is derived from the called price using the matrix and the order is validated or rejected accordingly. There are seven jumps in the quotation for securities quoted in GBP, EUR or USD, from 0.0001 for prices below 0.5 to 0.1 for prices above 1000.

The New York Stock Exchange (NYSE) has been quoted in leaps of eighths of dollars ($ 0.125) since 1792. In June 1997, the price jump on the NYSE was halved to one sixteenth of a dollar ($ 0.0625). This reduced both the spread and the market depth . The NASDAQ also halved the jump in quotation to sixteenths of a dollar in June 1997. In 2001, the NYSE reduced the price jump further to a penny (USD 0.01), using the decimal system for the first time since it was founded. Between August 2000 and April 2001, all American stock exchanges switched to decimal penny quotations. These tick size reductions were made by order of the SEC , which implemented the Common Cents Stock Pricing Act of 1997 four years late . This draft law did not become law in 1997 because a decimal conversion at the same time as the Y2K conversion was considered too risky.

Annuities

For securities that are quoted in percent, i.e. bonds , the jump in quotation is set in percent. In Frankfurt, the price jump for bonds is generally 0.001 percent, and for paper with a longer remaining term it is also roughly the same.

Individual evidence

  1. ↑ a b Jump to listing in the stock exchange dictionary of the Frankfurt Stock Exchange
  2. ↑ Tick ​​size . In: Guide to trading Securitized Derivatives on Millennium Exchange (PDF; 259 kB) . October 2010 London Stock Exchange plc, p. 10.
  3. ↑ Michael A. Goldstein, Kenneth A. Kavajecz: Eighths, Sixteenths and Market Depth: Changes in Tick Size and Liquidity Provision on the NYSE . In: Journal of Financial Economics . Vol. 56, No. 1 (April 2000), pp. 125-149. ( Draft paper ; PDF; 103 kB)
  4. ^ Nicolas PB Bollen and Jeffrey A. Busse: Tick ​​Size and Institutional Trading Costs: Evidence from Mutual Funds . In: The Journal of Financial and Quantitative Analysis . Vol. 41, No. 4 (December 2006), pp. 915-937. ( Preprint ; PDF; 183 kB)
  5. ^ SEC, Division of Market Regulation: Order Directing the Exchanges and NASD To Submit a Decimalization Implementation Plan . Securities and Exchange Commission, Release No. 34-42360 / January 28, 2000, File No. 4-430.