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 ?
However, decimalization may affect more than a stock's bid--ask spread.
In this article, I examine how various measures of stock market liquidity changed following decimalization.
I document that decimalization did lead to smaller spreads and lower depth, and thus caused a theoretically ambiguous change to market liquidity.
I then estimate the price impact of a trade, distinguishing trades undertaken before decimalization from those after and further distinguishing large trades from small trades.
Chakravarty, Panchapagesan, and Wood examine the effect of decimalization on institutional investors.
Chung, Chuwonganant, and McCormick show that the bid-ask spread (dealer quote aggressiveness) is positively (negatively) related to the proportion of internalized trades during both the pre- and post- decimalization periods.
For example, brokerage firms put decimalization on the back burner because of preparations for Y2K.
So, till decimalization becomes a reality, keep dividing the numerator by the denominator to determine that, say, 11/32 in a stock's price equals 0.
Decimalization supplanted fraction-based trading, and was introduced to help narrow spreads and pass along cost savings to investors.
Question 1: What impact do you think decimalization has on block
Question 2: How do you think decimalization should be addressed?
The system was designed with industry initiatives such as decimalization and Super Montage in mind, and has a keen focus upon ease-of-use, flexibility, and compliance.