Penny Jumping

Penny jumping is a trading tactic where a market participant places a limit order just slightly ahead of the current best bid or offer to gain priority. By improving the price by the smallest possible tick increment, the trader captures the queue position.

This strategy is common in high-frequency trading environments where speed and order priority are critical for capturing spreads. While it can improve liquidity at the top of the book, it often forces other participants to continuously update their orders, increasing messaging traffic.

Exchanges sometimes implement rules to discourage this behavior if it is deemed predatory or detrimental to market stability. It highlights the competitive nature of market microstructure.