ARE TEENIES BETTER

On June 5, 1997, the NYSE voted to adopt a system of decimal price tra ding, changing its longstanding practice of using eighths. While the s ystem does not go into place until the turn of the century, the NYSE b egan trading stocks in sixteenths, so-called teenies, as an intermedia te step on June 24, 1997. In this article, the authors examine whether the refined price gradation has reduced trading costs on the NYSE. Th e evidence indicates that both bid-ask spreads and market depth at the prevailing bid-ask quotes have fallen. On balance, investor trading c osts have dropped overall, with the largest gains experienced for low- priced shares and for small trade sizes.