by 
The Curious Bag
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Although the stock markets no longer trade stocks using eighths, the United States was the last country to switch stock trading to a decimal system. The use of eighths of a dollar as the minimum price increment for stock trading dates back more than 200 years.
History
When stock markets started up in the U.S. in the late 1700s, the silver Spanish real or "piece of eight" coin was used as the U.S. dollar. Change for these coins was made by chopping the coin into eighths.
Time Frame
The Spanish coins continued to be used as U.S. currency until the 1857, locking the use of eighths into stock market practice. Stocks continued to be quoted in eighths until 1997.
Conversion
The New York Stock Exchange started stock trading in 1/16 increments in 1997. In August 2000, first decimal or penny quoting started in selected stocks. By January 2001, all stocks and stock options were quoted in decimals.
Significance
The switch away from eighths to decimals was resisted by the financial community. Stock exchange members and market makers were able to earn an eighth of a dollar or 12.5 cents on almost every share traded. With over a billion shares trading every day, this was serious money.
Effects
Decimal trading allows heavily traded securities to have a bid-ask spread as small as 1 cent. The small spreads have allowed individual traders to more easily profit from stock price changes.
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