Trading stocks in pennies may be easy and efficient, but boy is it dull. So your friends at the Securities and Exchange Commission are batting around some ideas to spice things up without making your brains hurt too much.
Among the brainstorms is a return to trading in fractional prices. But it seems that in the almost 12 years since we began quoting stock prices in pennies, such complicated quantitative analysis has become all-but-impossible for the average trader and stock exchange.
Fractions make "the math harder for people, and you'd have to recode the systems," said David Weild, capital-markets advisor at accounting firm Grant Thornton LLP, who has pressed regulators and legislators for wider tick sizes. "What people want are choices for ticks like pennies, nickels, dimes or quarters" rather than fractions that aren't easily converted to decimals.
Ask and ye may receive: The SEC will consider price ticks in the nickel and dime range, as well as some others in advance of a public meeting in February.
One possibility is testing a range of ticks greater than one cent but fewer than eleven cents, depending on characteristics of the stock such as price or company market capitalization, said one person participating in the discussions.
Abandoning the penny standard for some companies would be designed to increase the number of publicly-traded small companies, as well as their trading volume and coverage.
On Second Thought, Fractions May Not Add Up [WSJ]
become all-but-impossible for the average traderU.S. Students Still Lag Globally in Math and Science, Tests Show [NYT]
*Six and one-quarter pennies. $0.0625, sans fraction.