Nasdaq begins trading stocks in decimals

by Maria Trombly

April 17, 2001 —

The Nasdaq stock exchange caught up to the rest of the securities industry -- and the rest of the world -- last week when it finally dropped fractions and switched to decimal stock pricing.

The transition went through without a hitch, said Scott Peterson, a spokesman for the Washington-based Nasdaq Stock Market Inc.

As expected, the spreads (the differences between the buy and sell prices) shrank, with those for the most active stocks declining the most. A typical spread fell by approximately 50%, Peterson said.

However, more time is needed before the exchange can accurately judge the change's effect on volatility and trading volumes, he noted.

The biggest fear -- that options exchanges would suffer from higher trading
volumes -- also didn't come to pass.

"Decimalization went extremely well for us," said Dan Friel, CIO at the International Stock Exchange, a New York-based options exchange.

"Our systems were originally designed to handle everything in decimals," he added. "In fact, what added complexity was having to support decimals and fractions simultaneously."

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