Securities Markets : Decimal Pricing Has Contributed to Lower Trading Costs and a More Challenging Trading Environment

In early 2001, U.S. stock & option markets began quoting prices in decimal increments rather than fractions of a dollar. At the same time, the minimum price increment, or tick size, was reduced to a penny on the stock markets & to 10¢ & 5¢ on the option markets. Although many believe that decimal pricing has benefited small individual (retail) investors, concerns have been raised that the smaller tick sizes have made trading more challenging & costly for large institutional investors, including mutual funds & pension plans. The financial livelihood of market intermediaries may also have been negatively affected by the lower ticks. This report assesses the effect of decimal pricing on retail & institutional investors & on market intermediaries. Charts.Hillman, Richard J. is the author of 'Securities Markets : Decimal Pricing Has Contributed to Lower Trading Costs and a More Challenging Trading Environment', published 2005 under ISBN 9781422302361 and ISBN 1422302369.