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Encyclopedia of Finance pp 439–442Cite as

Decimal trading in the U.S. stock markets

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Abstract

All NYSE-listed stocks were switched from a fractional to a decimal trading system on January 29, 2001 and all NASDAQ stocks followed suit on April 9, 2001. The conversion to decimal trading in the U.S. markets has significantly reduced bid-ask spreads. This decline is primarily due to the drop in market makers’ costs for supplying liquidity. In addition, rounding becomes less salient after the decimalization. The decrease in bid-ask spreads can be ascribed to the decrease in price rounding, when controlling for the changes in trading variables.

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Authors and Affiliations

  1. Indiana University Southeast, New Albany, USA

    Yan He

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  1. Yan He
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Editor information

Editors and Affiliations

  1. Rutgers University, New Brunswick/Piscataway, USA

    Cheng-Few Lee

  2. San Francisco State University, San Francisco, USA

    Alice C. Lee

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© 2006 Springer Science+Business Media, Inc.

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He, Y. (2006). Decimal trading in the U.S. stock markets. In: Lee, CF., Lee, A.C. (eds) Encyclopedia of Finance. Springer, Boston, MA. https://doi.org/10.1007/978-0-387-26336-6_42

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  • DOI: https://doi.org/10.1007/978-0-387-26336-6_42

  • Publisher Name: Springer, Boston, MA

  • Print ISBN: 978-0-387-26284-0

  • Online ISBN: 978-0-387-26336-6

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