Stock's Hidden Pieces of Eight
   
  Dealing in stocks is a very old method of raising finances. So old, in fact, that originally stocks in the U.S. were traded in Spanish pesetas, or 'pieces of eight'. As a result, today's stocks are traded in one-eighth intervals of a dollar, that is 12.5 cents. Thus, in real trading where stock prices change, the minimum 'spread' is usually two 'ticks', or 25 cents.

That means that every stock transaction generates at least 12.5 cents profit for a broker. On Wall street, a widespread practice known as 'payment for order flow' means dealers kick back a few pennies for every share routed their way. Is this price fixing? Is the free market being distorted by trading in one-eighths? Some members of Congress think so, and a bill to forcibly move U.S. stock markets to dollars-and-cents prices is slowly making its way through Congress.

According to the SEC, this will result in a saving of some $5 billion for investors. Some brokers, of course, say that the 12.5 cent gives them a necessary profit cushion. Their critics say that the mimimum spreads are inefficient, and that by reducing the profit on spreads a leaner, automated trading mechanism would evolve.