4-23 Decimalization involves making quotes in the equities markets in units of 1 cent ($0.01)rather than in units of one-eights of a dollar ($0.125).

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Decimalization was introduced in 2001 to make stock prices more precise and to narrow the bid-ask spread, which is the difference between the highest price a buyer is willing to pay for a stock and the lowest price a seller is willing to accept. Prior to decimalization, stock prices were quoted in minimum increments of one-eighth of a dollar ($0.125), which made it difficult to determine the exact price of a stock and could result in wider bid-ask spreads. Decimalization changed the minimum increment to one cent ($0.01), making prices more precise and narrowing bid-ask spreads.

4-23 Decimalization Involves Making Quotes in the Equities Markets in Units