TY - JOUR T1 - Pennies from Heaven? JF - Trading SP - 59 LP - 67 VL - 2001 IS - 1 AU - Charles M. Jones AU - Marc L. Lipson Y1 - 2001/03/20 UR - http://guides.pm-research.com/content/2001/1/59.abstract N2 - 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. ER -