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A Big Change: / to .

I expect few of you associate Tuesday, June 13, 2000 with anything important in mathematics. But, the events of that day had great impact, on math teachers, math learners, and the math users in the business community.

On that date, federal regulators announced that the stock market would switch from fraction notation to decimal notation. Why was this such a big deal...with considerable financial impact?

First, fractional stock prices is traced to the Spanish use of silver coins, cut into eights (i.e. "pieces of eight"). In 1997, the U.S. stock market allowed stock prices to be in sixteenths, as this led to more competitive markets.

By shifting to decimal pricing, even more competitive markets would be created. For example, consider the attraction of stock trades involving 16 possible prices to stock trades involving 100 possible prices. In addition to more attractive pricing options (buying at $4.01 versus at $4 1/16), the change removed some of the hidden stigma of not really knowing the true price of a stock listed in fraction notation (e.g. the old stigma is 7/16 greater or less than 5/8?).

When the change was announced, newspapers overflowed with articles describing the financial impact:

  • It would lead to higher broker fees, which reflect the "spread" between stock buying/selling prices
  • Consultants predicted that the change to decimals would lead to an 81% increase in trading volumes and a 231% increase in price quotes
  • It was predicted that the change would cost the financial services industry more than $1 billion to upgrade the software and network capabilities
Now everything seems normal. But, as a former seventh grade teacher, I remember how I was able to get students to experience fractions using the stock market. Each student had to "buy" a stock, and weekly chart its progress and calculate changes in value. That is, they had to use fractions! [Note: My only regret is that one student chose to "buy" stock in his father's company, which slowly went bankrupt that school year.]