| On June 5, 1997, the NYSE voted to adopt a system of decimal price trading, changing its
longstanding practice of using eighths. While the system does not go into place until the turn
of the century, the NYSE began trading stocks in sixteenths, so-called "teenies," as an
intermediate step on June 24, 1997. This paper examines whether the refined price gradation
has reduced trading costs on the NYSE. The evidence indicates that both bid/ask spreads and
market depth at the prevailing bid/ask quotes have fallen. On balance, investor trading costs
have dropped overall, with the largest gains being experienced for low price shares and for
small trade sizes. |