Are "Teenies" Better?
Journal of Portfolio Management 25, p.10-24, Fall 1998

Nicolas P.B. Bollen and Robert E. Whaley

ABSTRACT
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.