Did Decimalization Benefit Members of the Toronto Stock Exchange?

We examine the impact of adopting decimal price quotes on the welfare of members of the Toronto Stock Exchange (TSX) based on a multivariate analysis of seat prices. Consistent with existing studies, we find that decimalization leads to lower bid-ask spreads as well as lower quoted depths. To see if the combined effect of these changes benefited TSX members, we examine changes in the TSX's market share and total trading volume of interlisted stocks. In addition, we measure the wealth effect of decimalization on the TSX members using a multivariate analysis of seat prices. Our results suggest that TSX members anticipated positive benefits from decimalization, and that the switch to decimal prices had not adversely affected them