PT - JOURNAL ARTICLE AU - Charles M. Jones AU - Marc L. Lipson TI - Pennies from Heaven? DP - 2001 Mar 20 TA - Trading PG - 59--67 VI - 2001 IP - 1 4099 - http://guides.pm-research.com/content/2001/1/59.short 4100 - http://guides.pm-research.com/content/2001/1/59.full AB - What will decimalization and penny increments do to institutional trading costs? To help answer this question, we look back to 1997, when the U.S. exchanges moved from eighths to sixteenths. Using data on actual institutional trades before and after the switch, we find that trading costs are much higher for institutions under sixteenths. Liquidity demanders—momentum traders, large order submitters, those who aren't willing to work an order—bear the brunt of the increased costs. We discuss potential explanations, and we suggest that institutions seeking to control trading costs under pennies will have to trade more patiently.