In 2000, the S.E.C. permitted stocks to be traded in pennies or fractions of pennies, rather than the customary eighths or thirty-seconds of a dollar. That made it easier for traders to make money by placing very large orders for very small variances in the price of a stock.
Decimalization, Felix said, meant stocks traded in penny increments, not fractions of pennies.
Felix and Lemann were both sort of right, and both sort of wrong. Stocks can in fact trade in fractions of pennies, but not because of the SEC’s 2000 rule change. Or, at least, not solely because of the SEC’s 2000 rule change.
How common is it for stocks trade at sub-penny increments?
Less than 1 in 10 trades are done at sub-penny price increments. Here’s a chart from Nanex’s Eric Hunsader showing the percentage of stock trades that were executed at sub-penny increments: