Small stock focus: Nasdaq to start trading all stocks in sixteenths
The Nasdaq Stock Market, the nation's second-largest stock market after the New York Stock Exchange in market capitalization, expects to start allowing all of its stocks to be traded in 1/16-point increments starting Monday.</br></br>The change, while expected, is a milestone in the evolution of the markets -- and may, at least theoretically, lead to better prices for small investors.</br></br>The Securities and Exchange Commission's market-regulation division Tuesday evening approved the rule proposal, which Nasdaq submitted to the federal regulator April 10. The New York Stock Exchange, meanwhile, has so far steadfastly stuck to quoting in 1/8-point increments, though many market observers expect that will have to change once its competitors switch to sixteenths.</br></br>Currently, when Nasdaq dealers move their stock prices up or down, they change them in minimum "ticks" of 1/8 of a point, or 12.5 cents at a time. Thus far, only quotes for stocks that are priced at $10 or under are moved up or down in smaller increments, some as low as 1/32, or 3.125 cents.</br></br>Lowering the tick size for all Nasdaq stocks to 1/16 of a dollar, or 6.25 cents a share, could improve prices for individuals who will have the chance to buy for less or sell for more when investing in Nasdaq stocks -- from the market's giants like Intel and Microsoft, to the thousands of tiny stocks on the market. The reason is that "spreads" between the best possible price at which an investor can buy a stock and the price at which they can sell are likely to shrink.