Zero Plus Tick

A zero plus tick (also called a zero uptick) describes a trade that executes at the same price as the immediately preceding trade, but at a higher price than the last trade at a different price. It’s most commonly used for listed equities and is relevant to short-selling rules and short-term price analysis.

Key takeaways

• A zero plus tick occurs when a trade matches the previous trade’s price yet is higher than the last different-priced trade.
• The concept was central to historic uptick rules that limited short selling to upticks or zero upticks.
• Since 2010, an alternative uptick restriction prevents short selling on stocks that have dropped more than 10% in a day unless the sale occurs on an uptick.

Definition and simple example

If successive trades occur at $10.00, $10.01, and then $10.01 again, the last trade is a zero plus tick: it equals the prior trade’s price but is higher than the last trade at a different price.

Another illustration: if the bid is $273.36 and the offer is $273.37, a transaction at $273.37 is an uptick. A subsequent transaction at $273.37 is a zero plus tick.

Historical context: the uptick rule

The original uptick rule (Rule 10a-1), implemented in 1938, allowed short sales only on an uptick or a zero uptick. Its purpose was to reduce the potential for short sellers to add downward momentum to falling stocks. The SEC removed that rule in 2007, citing changes in market structure. In response to market stresses during the 2008 financial crisis, the SEC implemented an alternative restriction in 2010: if a stock declines more than 10% in a single trading day, short selling is permitted only on an uptick for the remainder of that day and the following trading day.

Zero downtick (opposite)

A zero downtick occurs when a trade equals the previous trade’s price but is lower than the last trade at a different price. While not necessarily signalling a strong bearish trend on its own, a zero downtick can indicate a temporary pause in upward momentum or a shift in short-term sentiment.

Why zero upticks matter

• Short-term momentum: Zero upticks indicate buyers are willing to transact at the same price as the last trade, suggesting sustained buying interest.
• Liquidity signal: Frequent zero upticks usually imply active trading and tighter bid-ask spreads; few zero upticks can point to lower liquidity and higher volatility.
• Short-selling constraints: Under uptick-related rules, the ability to enter a short position can depend on whether the last trade was an uptick, zero uptick, or downtick.
• Technical analysis: Traders may incorporate zero upticks/downticks into price-action analysis to help identify short-term support/resistance and inform entry or exit decisions.

Related concepts

• Tick: The smallest price increment by which a security can move (commonly $0.01 for U.S. stocks).
• Short selling: Borrowing shares to sell them now with the intention of repurchasing them later at a lower price to profit from the decline. Short-selling rules interact with uptick concepts to prevent excessive downward pressure.
• Technical analysis: A method of evaluating securities by examining price and volume patterns; small tick patterns like zero upticks can be part of that analysis.

Summary

A zero plus tick is a subtle but useful indicator of short-term price behavior: it denotes a trade that matches the immediately prior price while being higher than the last different price. The concept has regulatory importance in the context of short-selling rules and practical importance as a signal of momentum and liquidity in intraday trading.