Tick Mechanism

Definition ∞ A Tick Mechanism in financial markets, including digital asset exchanges, defines the smallest permissible price increment by which an asset’s price can change or be quoted. This granular unit ensures orderly price discovery and prevents excessively small, illiquid price movements. It standardizes trading operations and impacts the precision of order placement and execution.
Context ∞ The design of tick mechanisms is important for optimizing market liquidity and reducing arbitrage opportunities across various trading platforms for digital assets. Discussions often consider how different tick sizes affect high-frequency trading and the overall fairness of price execution. As digital asset markets mature, standardized tick sizes across exchanges could enhance market efficiency and reduce fragmentation.