Early reports indicate that the conversion to decimal pricing has been a smooth one. While the number of trades reported went down, the average size of the trades increased, according to the study. The transition will not affect the bond markets, which will continue to trade in fractional increments.
Lower spreads can mean lower transaction costs for individual and institutional investors alike.
So if a stock traded at a two-tick spread, the professional stock dealer's profit margin was 12.5 cents. Now that stocks are traded in one-cent increments, the dealer's profit margin is greatly reduced. Another benefit of decimalization is that it will make the U.S. markets consistent with foreign markets, which already use decimal pricing. The U.S. stock markets began the move to decimal pricing last summer. Officials from the stock exchanges are expected to report back to the SEC in June on the early effects of decimal pricing.