Traders can compete on
- price
- queue position
Small ticks mean they compete on price and big ticks mean they compete on queue position - to trade they need to have an order on the book, offering to trade at the current tick, that is ahead of other orders.
It's easy to see how the market benefits if people compete on price. However, it also benefits if people show how much they are willing to buy and sell. No sophisticated trader wants to reveal that as they will be taken advantage of when they are wrong. By having bigger tick sizes you incentivise people to try to get into the queue at these artificially better prices - it pulls liquidity into the open.
The tick size pilot that concluded in 2019 shows how this balance isn't easy to strike https://www.finra.org/rules-guidance/key-topics/tick-size-pi...