Decimalization


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Decimalization

The quotation and trading of stock or bond prices in decimals, as opposed to fractions such as eighths.

Decimalization

1. The process of changing listings of security prices from fractions to decimals. Decimalization makes prices and the market easier for investors and laypeople to understand.

2. In the United Kingdom, the process of changing the calculation of the pound sterling to a decimal system. Prior to 1971, the UK had a very complex way of calculating subdivisions of the pound. Since then, the currency has been decimalized into 100 pence.

decimalization

The transition of security prices being quoted in decimals rather than fractions. Decimalization in U.S. markets started in fall 2000 with exchange-listed stocks and was completed in April 2001 with Nasdaq stocks. Studies during the transition indicated that moving to decimals benefited investors by reducing the bid-ask spreads.
References in periodicals archive ?
Advocates of the adoption of decimalization argue that the finer gradation of stock prices will benefit investors.
Bollen's recent research on decimalization and funds shows that the implementation of penny-pricing was followed by reduced bid/ask spreads, making it seem that trading costs had declined.
After decimalization, the hypothesis that liquidity suppliers do not earn rents cannot be rejected.
And while the NYSE has said it's ready for decimalization, industry observers think it's highly unlikely the Big Board will make the change on its own.
The Securities Industry Association plan calls for a decimalization phase-in, which began in late August 2000, to be fully implemented by April 2001.
Velocity Order Book Analyzer was created to support major brokers, hedge funds and trading system vendors faced with processing and managing vast amounts of Level 2 quote data caused by order fragmentation, decimalization and regulatory changes.
Amex: KEA), today announced it is participating in the American Stock Exchange (Amex) decimalization plan, part of an industry-wide initiative that began on August 28.
However, as the size of trades continues to decrease and decimalization makes it more difficult to find large liquidity, the attributes that attracted institutional and hedge fund flows to the external crossing networks - ready liquidity, potential price improvement and controlled information leakage - are now attracting the buy-side to the broker's internal markets.
source on the decimalization of the NYSE and all US Securities
While broker algorithms have helped resolve some buy-side challenges, such as market impact and information leakage, many in the marketplace blame transparency, fragmentation and small trade size on external forces -- specialists, market makers, decimalization and the SEC.
First, decimalization should lower trading costs because the new system may narrow trading spreads, the difference between 'bid' and 'ask' prices on stocks.
Volatile markets, tighter margins, Basel II compliance, 24x7 market access and decimalization have created the need to model larger, more complex data sets creating new demand for sophisticated, powerful analytic tools to enable profitable business performance.