Price Rounding and Precision Conventions

Prices in every market are quoted in discrete increments called ticks, a US stock can't trade at $10.005, only at $10.00 or $10.01 under the sub-penny rule, and any calculation that produces a price in between has to be rounded to the nearest allowed tick before it can actually be traded. The same logic applies beyond quoted prices: interest accruals, converted share counts, and P&L figures all get rounded somewhere, and the convention used (round half up, round half to even, always round down) is a small detail with real consequences.

The rounding rule matters most in three places: converting a theoretical fair value into an executable limit price, computing per-share dividends or splits that don't divide evenly, and aggregating small daily rounding differences across a large position over a long backtest. A "round half to even" (banker's rounding) convention, common in accounting systems, will silently disagree with the naive "round half up" a spreadsheet does by default, and over thousands of rows those disagreements accumulate into real basis points of tracking error.

The safest habit is to round only once, as late as possible in a calculation, and to match whatever convention the venue or custodian actually uses rather than whatever a library defaults to.