Investopedia

Continue to Site »

Decimalization

Filed Under »
Dictionary Says

Definition of 'Decimalization'

A system where security prices are quoted using a decimal format rather than fractions. For example, this is a decimal trading quote: $34.25. Using fractions, the same quote would appear as $34 1/4. The U.S. Securities and Exchange Commission (SEC) ordered all stock markets within the U.S. to convert to decimalization by April 9, 2001, and all price quotes since appear in the decimal trading format.

Before 2001, markets in the United States utilized fractions in price quotes. The switch was made to decimalization to conform to standard international practices and to make it easier for investors to interpret and react to changing price quotes.
Investopedia Says

Investopedia explains 'Decimalization'

Decimalization has led to tighter spreads because of the corresponding smaller price increments and movements. For example, prior to decimalization, one-sixteenth (1/16) of one dollar was the smallest price movement that could be represented in a price quote (this is approximately six cents, or $0.0625). With decimalization, the minimum price movement is now one cent, or $0.01, providing a greater number of price levels, and allowing for tighter spreads between the bid and the ask levels for trading instruments.

Articles Of Interest

  1.

    Pin Down Stock Price With Real Options

    How can you assign a value to what a company may do with its business in the future? We explain how it works.

  2. Understanding The Ticker Tape

    We explain the meaning and use of that reel of symbols whizzing across your TV or computer screen.

  3. Are Your Stocks Doomed?

    When a company is headed for trouble, the warning signs are usually there. Learn how to spot disaster.

  4. What Is The Impact Of Research On Stock Prices?

    The answer to this question is directly related to the importance of information in the marketplace.

  5. Forces That Move Stock Prices

    You can't predict exactly how stocks will behave, but knowing what affects prices will put you ahead of the pack.

  6. The Basics Of The Bid-Ask Spread

    Understanding the real forces that move stock prices is part of being a good trader.

  7. Stock Basics Tutorial

    If you're new to the stock market and want the basics, this is the tutorial for you!

  8. What is a stock ticker?

    A stock ticker is a report of the price for certain securities, updated continuously throughout the trading session by the various stock exchanges. A "tick" is any change in price, whether that ...

  9. Institutional Investors

    Learn more about the advantages that financial institutions enjoy when buying and selling securities.

  10. Weighted Average

    Learn how to weigh the relative importances of data points in a calculated average.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  2. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  3. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  4. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  5. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  6. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.
Trading Center