The pilot program includes seven stocks on the New York Stock Exchange and six stocks on the American Stock Exchange. The Securities and Exchange Commission ordered the change to make it easier to compare stock prices and to allow for increased competition. This will not affect the bond markets, which will continue to trade in fractional increments. Decimalization will make the U.S. markets consistent with foreign markets, which already use decimal pricing.
Lower spreads can mean lower transaction costs for individual and institutional investors alike.
So if a stock trades at a two-tick spread, the trader's profit margin is 12.5 cents. A one-cent spread could dramatically increase trading volumes. Stocks that currently trade in 6.25-cent increments trade at 16 different prices per dollar. Inc. All rights reserved. Vanguard Marketing Corporation, Distributor.