What are Teenies?
How do you legally define it?
What are the essential elements you should know!
In this article, we will break down the legal and financial definition of Teenies so you know all there is to know about it!
Keep reading as we have gathered exactly the information that you need!
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Table of Contents
A “teenie” represents one-sixteenth (1/16) of a basis point in the context of financial trading.
To put things in perspective, one basis point is one-hundredths of a percent (1/100).
Historically, stocks used to trade by a teenie representing the smallest by which a stock price can move up or down.
The use of teenie resulted in infractions in the prices.
Eventually, in 2001, the SEC (Securities and Exchange Commission) in the United States moved away from using teenies to using a decimal system.
To express a teenie in decimal, you’ll have 0.0625.
What is the definition of teenie?
According to Investopedia, a teenie is defined as:
A teenie is one-sixteenth of a basis point, where a basis point represents one-hundredth of a percent.
In short, a teenie or teenies refers to a sixteenth of a dollar or basis points.
Historically, a security’s price would move up or down by a teenie representing the smallest fraction that the price can move.
Since teenies represent 1/16th of a basis point, this quoting system resulted in computing fractional prices in the stock quotes.
To simplify things further, the SEC overseeing the U.S. stock markets moved from the teenie system to a decimal system (transition called decimalization).
By using decimals, the smallest unit a stock price can move is 0.01 cents.
With the new system, many traders still refer to a “teenie” but to mean 1 cent.
Teenies were adopted as a method to quote stock prices based on the practice used by the Spanish traders hundreds of years ago.
They would use gold doubloons to enable trade.
They could divide the doubloons in two, four or eight pieces when trading.
Eventually, when the New York Stock Exchange was formed, they used the teenies (Spanish trading system) as the basis to quote their prices.
As a result, stocks traded based on denominations of 1/8th of a dollar.
In 1997, with the objective of modernizing the trade of stock, the stock markets in the U.S. started using dollars and cents instead of teenies.
Some called this to be the “teenie revolution”.
So what is the legal definition of Teenies?
What is the meaning of teeny?
Let’s look at a summary of our findings.
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