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.

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.


Investment dictionary. . 2012.

Look at other dictionaries:

  • decimalization — n. the act of changing to a decimal system; as, the decimalization of the British currency. Syn: decimalisation. [WordNet 1.5] …   The Collaborative International Dictionary of English

  • decimalization — (Amer.) n. conversion to the decimal system (also decimalisation) …   English contemporary dictionary

  • decimalization — noun the act of changing to a decimal system the decimalization of British currency • Syn: ↑decimalisation • Derivationally related forms: ↑decimalise (for: ↑decimalisation), ↑decimalize …   Useful english dictionary

  • Decimalization — Decimalize Dec i*mal*ize, v. t. to convert the dominant units of measure (e.g. of currency) to a decimal based system; to reduce to a decimal system; as, to decimalize the currency. {Dec i*mal*i*za tion}, n. [1913 Webster] …   The Collaborative International Dictionary of English

  • decimalization — noun Date: 1855 conversion (as of a currency) to a decimal system • decimalize transitive verb …   New Collegiate Dictionary

  • decimalization — See decimalize. * * * n [U] the change of the British currency to the present decimal system of 100 pence to the pound, which happened on 15 February 1971. Before that date, the pound was divided into 20 shillings with 12 pence in each shilling.… …   Universalium

  • decimalization — The quotation and trading of stock or bond prices in decimals, as opposed to fractions such as eighths. Bloomberg Financial Dictionary …   Financial and business terms

  • decimalization — dec|i|mal|ization also decimalisation BrE [ˌdesıməlaıˈzeıʃən US ˌdesəmələ ] n [U] the process of changing to a decimal system of money or measurement >decimalize [ˈdesıməlaız US ˈdesəmə ] v [I and T] …   Dictionary of contemporary English

  • decimalization — dec·i·mal·i·za·tion …   English syllables

  • decimalization — See: decimalize …   English dictionary

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.