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Trading costs and the tick size
Buying a share costs you two things. There's the commission you pay your broker, which everyone notices, and there's the spread between the price you can buy at and the price you can sell at, which most people never think about. Over the last thirty years both have collapsed, and they got there by completely separate routes.
The spread side is mostly a story about the tick, the smallest amount a quoted price is allowed to move. US stocks traded in eighths of a dollar until June 1997, then sixteenths, then pennies from April 2001, and a half penny arrives for the tightest stocks in November 2026. Every one of those steps did the same two things: it narrowed spreads and it thinned out displayed depth. The commission side ran on its own track, from a regulated percentage of the trade value in the 1970s all the way to zero at the major retail brokers in October 2019. Except zero isn't free, and the page explains where the cost went instead.
I built this because trading costs are the part of a strategy people model last and get wrong most, and because there's a genuinely useful experiment in here: in 2016 the SEC widened the tick for a set of small stocks and measured what happened, which is about as close to a controlled trial as US equity markets ever get. Where a commonly quoted figure couldn't be confirmed in a primary document I've said so in the notes rather than repeating it. Everything else is sourced to SEC and government reports, all linked and dated at the bottom.
The minimum price increment for a US stock went from an eighth of a dollar to a sixteenth in June 1997, to a penny by April 2001, and will go to half a penny for tick constrained stocks from November 2026. Each step cut spreads and cut depth. Decimalisation took NYSE quoted spreads from 15.39 cents to 4.18 cents on one measure, a fall of 73%. Commissions followed a separate path, from a regulated 0.90% of value in 1974 to zero at the major retail brokers from October 2019. The 2016 tick size pilot proved the mechanism runs both ways: widening the tick to five cents raised effective spreads by over 50%.
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