One of the main reasons for the stock split is liquidity. By increasing the number of shares, the new price will be half or one-third, depending on the split ratio. Wouldn't it be possible to achieve the same result by buying fractional shares? Why is stock split necessary if we can achieve the same results with fractional shares?

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    $\begingroup$ Define the same result. Personally, I think it's quite different. See for example this SEC bulletin for some important differences. $\endgroup$
    – AKdemy
    Commented May 15 at 0:33

1 Answer 1


It is not possible to buy a fraction of one share on exchanges (or on any trading facility). Brokers are offering this by (somehow) pulling all the fractional buy or sell to achieve one full buy or sell.

As a consequence, on exchange the best bid and offer are always for multiples of one share (putting aside the issue of "odd lots" on some exchanges).

Knowing that, you have to know that trading takes place as a double auction, and for a lot of reasons (historical, technical, and priority management), there is a smallest possible price increment, that is called the tick size.

Say that the tick is 1 dollar (this is an exaggerated example), then if the price of a share is 1,000 dollars, traders can "jump" in front of an existing seller or buyer for 1/1,000 of the price (that is very cheap, participants will move back and forth a lot, generating noise), whereas, if the price of a share is 2 dollars, the cost to jump is 1/2 of the price (that is very expensive).

Both are not very efficient, there is an optimal tick size. Splitting (and reverse splitting) shares is a way to maintain the ratio in the "best" sweetspot.

Have a look at L., and Sophie Laruelle. Market microstructure in practice. World Scientific, 2nd Edition 2018.


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