FINRA - Investor Information - Markets and Trading

It is simply a way of listing the price of something in dollars and cents, with a decimal point between the two. You'll find decimal pricing almost everywhere that there are monetary transactions. Until recently, however, the U.S. securities markets used fractions, instead of decimal pricing. For example, if you bought a stock at a price of 35 1/2, under decimal pricing, that same purchase now decimalizes to $35.50.

What are the benefits of changing to decimals?

First and clearest is that decimal prices are easier to understand. The securities industry and regulators have been simplifying the information that investors need. Using more "plain English" in prospectuses and client communications is one example. Decimal pricing is another.

Decimalization will also help U.S. markets compete with foreign exchanges, which already use decimals. Our decimalization will reduce the slight disparities that can occur when foreign securities trade in decimals in their home market and fractions on a U.S. exchange.

Preliminary reviews by the SEC and The Nasdaq Stock Market show that decimal trading has substantially narrowed quoted spreads. Nasdaq reports that the average effective spread for its securities has shrunk 50% since decimalization went into effect. Similarly, the SEC estimates that the average effective spread for New York Stock Exchange securities shrunk 28%. The overall narrowing of spreads makes it likely that retail investors entering small orders have experienced reduced trading costs.

How does decimalization change the way I invest?

Very little. Your overall investment strategy shouldn't be affected. However, some procedural aspects of investing have changed. You will have to get used to placing orders and receiving executions in decimals instead of fractions. And the quotes you get from your brokerage firm, whether electronically or through a broker, will all be in decimals.

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Decimalization - Frequently Asked Questions