In this study, I examine the stocks of 1,339 companies that began decimal trading on the NYSE on January 29, 2001.
Wood, 2001, "Decimal trading and market impact," Purdue University, working paper.
In fact, they find an average decrease of 13 basis points, or roughly $224 million a month, in savings of institutional trading costs after moving to
decimal trading. As to institutional order-routing practices, the smaller and easier-to-fill orders more often are routed to electronic brokers, while the larger and more-difficult-to-fill orders are sent to traditional brokers.
Innovation continued with the launch of the Toronto 35 Index in 1987, the introduction of North America's first
decimal trading in 1996 and the shift to a floorless, all-electronic environment in 1997.
Under
decimal trading, investors will be able to trade at increments of five cents for most stocks, and eventually perhaps in pennies.
"
Decimal trading will benefit investors by allowing greater competition and making it easier to compare prices," SEC Chair Arthur Levitt said.