Stock market switch fractions decimals
NEW YORK — The New York Stock Exchange will make history Monday when it converts all of its stocks to decimal pricing--ending two centuries of pricing in fractions.
Why does the stock market use fractions? | HowStuffWorks
On Monday, the Big Board makes a giant leap by switching all 3, of its stocks to decimals, ending for good the fractional minimum prices whose roots were in the Spanish empire's silver piece-of-eight coin--so called because it could be broken into eight bits.
The NYSE's archrival, the Nasdaq market, won't begin its decimal test phase until March 12, though Nasdaq says it will shift completely to decimal pricing by April 9, the deadline set by the Securities and Exchange Commission.
Market critics and regulators have long pushed for decimal pricing, saying there was no reason to continue a fractional system that helped guarantee a minimum "spread" between the bid and asked stock prices set by Wall Street dealers--and thus assured a minimum trading profit for those dealers, at investors' expense.
Stock Exchanges Trade Fractions for Decimals - ABC News
But analysts also warn that decimal pricing is likely to mean greater market volatility and more disputes over trade execution. Though most foreign markets already trade in decimals, U.
In a decimal system there are The bid is the highest price a buyer is willing to pay for a stock at a given moment.
THE MARKETS: STOCKS AND BONDS; Nasdaq Wants to Delay Switch to Decimals - The New York Times
The asked is the lowest price acceptable to a seller. However, the study also indicated a trade-off in terms of "liquidity," or the ease of finding buyers or sellers at a particular price.
Generally speaking, fewer shares were available at each price level under decimals versus under fractions. A related concern is that the effectiveness of "limit" orders--orders to buy or sell a stock at a specific price, or better--could be reduced under decimal pricing.
Experts say investors could find that professional traders are "stepping in front" of investors' limit orders. If the stock price kept moving higher, the dealer's offer would top yours, and your trade would never go through. Market orders are executed immediately at the prevailing price.
Do stocks really trade for fractions of a penny? Sort of
But small investors in recent years have been counseled against using market orders, because in fast-moving markets the risk is high that the price you get will be much different than the price quoted when you entered the trade. Tighter price spreads, lower liquidity and fewer limit orders probably will add up to more volatility in the market, Weisberg said. When selling pressure starts pushing a stock down, he explained, it typically triggers standing limit orders to buy at lower price levels.
As these orders get executed, they ease the downward pressure. Thus, if limit orders become less popular, it could reduce this "braking" action and make for quicker, scarier price declines. Dealers, for their part, will see their bid-asked price spreads cut. But veteran trader Bernard Madoff said that professionals will find a way to make money. Madoff and Weisberg said decimal pricing also may provide more opportunities for such pros as NYSE "floor brokers.
Markets NYSE, Amex Will Shift All Stocks to Decimal Prices on Monday.
Critics long pushed for conversion from fractions, but analysts warn move could increase volatility. Nasdaq will shift in April. January 26, THOMAS S. MULLIGAN TIMES STAFF WRITER. Seizure Led to FloJo's Death. His scores make his case.
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