Panel Picks Day to Begin Test of Pricing Stocks in Decimals
By EDWARD WYATT
... For more than two years, regulators and Wall Street firms have been discussing the looming conversion of stock and option prices to decimals, a move that many overseas markets have already made. But the move has been put off until after the beginning of next year to allow securities firms to prepare their computer systems for the Year 2000 issue.
A major concern of securities firms is that the conversion will increase the number of quotes and orders so much that it might overload exchanges' computer systems.
A study commissioned by the association predicted that converting to a system where stock prices are quoted and move in increments of one penny at a time would increase by 80 percent the number of trades taking place each day. In addition, the number of quotes processed through the computer systems of market participants would jump by 139 percent each day, while overall share volume would increase by only 9 percent.
A move to a minimum price increment of 5 cents, however, would cause an increase of only 3.5 percent in the number of trades and quotes, the study predicted. Wall Street has already found that by quoting stock prices in sixteenths rather than eighths of a dollar, the average number of trades each day has increased faster than expected.
The trade group's Decimal Steering Committee chose July 3 as the date to begin the conversion project because Tuesday, July 4, is a national holiday. Although the financial markets will be open on July 3, many Wall Street professionals are likely to turn the first weekend in July into a four-day holiday, making trading volume light as the switch to decimals gets under way. ...
On Aug. 7, in the second phase of the proposed process, all stocks and stock options would begin to be quoted in decimals and traded in five-cent minimum increments. Eight weeks later, on Oct. 2, all securities could be quoted and traded in "whatever increments market forces determine," the group said. ...
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