Investment and Finance

Decimalization is the conversion of all U.S. stocks and options pricing, quoting, trading and reporting from fractional to decimal pricing. Prices for stocks and options will be stated in dollars and cents ($50.25) rather than in dollars and fractions ($50 1/4).

The U.S. (SEC)Securities and Exchange Commission is requiring that all major U.S. Stock and Options Exchanges, as well as Nasdaq, change from fractional pricing to decimal pricing. U.S. brokerage firms will therefore be required to use decimal pricing. Decimalization pricing is expected to be beneficial for individual investors. Pricing is more easily understood in dollars and cents, which may encourage more people to buy and sell stocks and options. Decimalization pricing may also achieve savings for investors to the extent that it provides an opportunity to buy and sell stocks and options in smaller price increments per share.

The U.S. stock and options markets are the only major markets still trading in fractions. The conversion to decimal pricing is intended to make the U.S. markets more compatible with other related markets. This conversion will make the U.S. markets more competitive with foreign markets, which already price, quote and trade in decimals.

No mixed pricing will be allowed for a single stock or option. During the phase-in period, a select group of stocks and options will be priced in decimals, while all others will be priced in fractions. Once the phase-in is fully implemented, pricing, quoting and trading will only be done in decimals. An exception to this rule is the exercise price for options. They will remain in fractions during the phase-in period. Option premiums will be expressed decimally in dollars and cents.

The following websites are available for more information about Decimalization: The New York Stock Exchange at www.NYSE.com, the American Stock Exchange at www.AMEX.com, the Securities Industry Association at www.SIA.com, and the National Association of Securities Dealers at www.NASD.com.

The two basic types of orders that you can place to buy or sell a stock are known as Market Orders and Limit Orders. A Market Order must be executed at the prevailing market price when the order reaches the market, even if the market price has moved significantly since the order was placed. The price you receive depends on market conditions at the specific time of execution. A Limit Order is an order in which you set a maximum price you are willing to pay to buy a security, or the minimum price you are willing to receive to sell a security. By placing a limit Order, you can take precautions that your order will not be executed above the limit for a buy order or below the limit for a sell order. By doing so, you take the risk that the order will not be executed at all if the order cannot be executed within the limit. Market orders provide an execution at the current market price. During volatile trading conditions, Market Orders carry the risk that the execution price you actually obtain may be substantially different from the quoted price at the time your order is placed.

In the Stock Market, common stocks of well-known companies with histories of profit growth and dividend payment, as well as quality management, products, and services are known as "Blue Chip Stocks".
Blue chip stocks are usually high-priced and low-yielding. It is believed the term "blue-chip" comes from the game of poker in which the blue chip holds the highest value.

CATS (Certificates of Accrual on Treasury Securities)are Issues from the U.S. Treasury sold at a deep discount from their face value. They are called Zero Coupon securities because they require no interest payments during their lifetime, but they return the full face value at maturity. They cannot be called away.