[throwaway283719]

> There is also a reason why FX is quoted to 4 decimal places while equities are to 2, sometimes 3 for penny stocks.

Isn't the reason that most FX rates are O(1) (eg EURUSD is about 1.34, cable is about 1.7) whereas most stocks are O(10) or even O(100) and O(1000)?

If you take an FX rate that isn't O(1) eg USDJPY which is about 100, the convention is that it's quoted to 2 decimal places, like a stock (though there are some exceptions, eg USDMXN is around 13 but it's quoted to 4dp, and USDRUB is around 35 and also quoted to 4dp).

[minimax]

Stocks in the US are quoted to 2 decimal places because of reg NMS rule 612 (the subpenny rule). Any displayed quotes above $1.00 are priced in pennies and below $1 you can quote in increments of $0.0001. Trades can however happen in subpenny increments. For example retail internalizers may offer subpenny price improvement (e.g. market is 20.00 x 20.01 - retail market sell order gets filled at 20.0001). Also non-displayed bids and offers may exist at subpenny increments (e.g. market is 20.00 x 20.01 and there is a non-displayed midpoint peg buy at 20.005 at nasdaq - incoming marketable sell will match and print at 20.005).