TPH
Tri Pointe Homes, Inc.
stock NYSE

I don't believe that I've ever seen a rule that a market-maker is required to price improve.
Option exchanges used to have an issue with interlinkage about 25 years ago. There used to be a problem with intermarket trade-throughs which in theory shouldn't really occur anymore.
It's my understanding that a market-maker is incentivized to price-improve for brokers if they want flow routed to them. Brokers use a wheel to route orders. And the broker wheel tracks execution quality performance metrics. So - a broker may prioritize orders via their wheel to market makers with better metrics. I think that a broker that is a TPH can also route directly to the an exchange PIM like CBOE's AIM or C-AIM auctions for price improvements.
As for price improvements by tick - I have received penny-based improvements on options which quote in $0.05 increments. Although - I've never understood how the penny interval program works so I may be mistaken.

I don't believe that I've ever seen a rule that a market-maker is required to price improve.
Option exchanges used to have an issue with interlinkage about 25 years ago. There used to be a problem with intermarket trade-throughs which in theory shouldn't really occur anymore.
It's my understanding that a market-maker is incentivized to price-improve for brokers if they want flow routed to them. Brokers use a wheel to route orders. And the broker wheel tracks execution quality performance metrics. So - a broker may prioritize orders via their wheel to market makers with better metrics. I think that a broker that is a TPH can also route directly to the an exchange PIM like CBOE's AIM or C-AIM auctions for price improvements.
As for price improvements by tick - I have received penny-based improvements on options which quote in $0.05 increments. Although - I've never understood how the penny interval program works so I may be mistaken.