Decimal Trading

AAA

DEFINITION of 'Decimal Trading'

A system in which the price of a security is quoted using a decimal format rather than fractions. For example, a decimal trading quote would be $56.25; using fractions, the same quote would appear as $56¼. The U.S. Securities and Exchange Commission (SEC) ordered all stock markets within the U.S. to convert to decimals by April 9, 2001. Prior to 2001, markets in the United States utilized fractions in price quotes. Since decimalization, all quotes appear in the decimal trading format.

INVESTOPEDIA EXPLAINS 'Decimal Trading'

Decimalization has led to tighter spreads since smaller price movements can be accounted for. For example, prior to decimalization, one-sixteenth (1/16) of $1 was the minimum price movement represented in a price quote (this is equal to $0.0625).


With decimalization, the minimum price movement is 1 cent for stocks over $1, providing a greater number of price levels and allowing for tighter spreads between the bid and the ask levels for trading instruments.

RELATED TERMS
  1. Quoted Price

    The most recent price at which an investment (or any other type ...
  2. Ask

    The price a seller is willing to accept for a security, also ...
  3. Bid-Ask Spread

    The amount by which the ask price exceeds the bid. This is essentially ...
  4. Bid

    1. An offer made by an investor, a trader or a dealer to buy ...
  5. Decimalization

    A system where security prices are quoted using a decimal format ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value ...
Related Articles
  1. Investing Basics

    Understanding The Ticker Tape

    We explain the meaning and use of that reel of symbols whizzing across your TV or computer screen.
  2. overtrading can represent a far greater risk to a portfolio than mediocre stock selection or a bad market.
    Investing Basics

    Earn More Profit With Less Trading

    Avoiding overtrading can save your money and your sanity. Find out how to slow your turnover and build your profits.
  3. Trading Strategies

    Introduction To Trading: Scalpers

    This type of trader makes many trades per day to "scalp" a small profit from each trade. Find out how it works.
  4. Explain the logic behind government loans, how they work, why are they so big in the U.S and how they have an influence in the economy of the U.S and potentially abroad
    Economics

    An Introduction to Government Loans

    Government loans further policymakers' efforts to create positive social outcomes by offering timely access to capital for qualified candidates.
  5. Capital Markets are financial markets.
    Markets

    Capital Markets

    Capital Markets are financial markets where organizations that need money for productive long-term purposes.
  6. Bonds & Fixed Income

    Spotting A Market Bottom

    Recognizing a market bottom can lead to huge opportunities for an investor. We go over how you can spot the bottom so that you can reap the rewards.
  7. Investing Basics

    What exactly is being done when shares are bought and sold?

    Most stocks are traded on physical or virtual exchanges. The New York Stock Exchange (NYSE), for example, is a physical exchange where some trades are placed manually on a trading floor (other ...
  8. Economics

    Introduction To Asian Financial Markets

    We look at the history of Asia's financial development and how investors can get involved in these growing markets.
  9. Investing

    How does FINRA differ from the SEC?

    With all the financial organizations out there, knowing what they all do can be as complicated as knowing where to invest. The Securities and Exchange Commission (SEC) and the Financial Industry ...
  10. Active Trading

    Get Positive Earnings In The Negative-Sum Market

    Gain an advantage in the markets by understanding how to win in a negative-sum game.

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center