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Dollars and Cents

Traders Magazine, October 1999

Peter Chapman

The minimum trading increment is expected to tumble to a penny when the U.S. stock markets switch to decimal pricing next year. In stock trading, dollars and cents will replace the pricing of stocks in minimum fractions of one sixteenth of a dollar. For example, $20 1/4 would be expressed as $20.25.

At the start, decimal pricing is expected to be in minimum increments of a nickel. Later, the minimum increment is likely to be a penny on the most heavily traded stocks, trading pros say. Penny ticks will not dramatically increase the number of shares traded on Nasdaq and the listed markets, according to a study by SRI Consulting. But quoting and the number of trades will skyrocket, says the securities industry advisor. As a result, average trade sizes will drop by about 40 percent on both markets.

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