SEC Drops Plans for Decimal Trading
In July, Seeks Comment on Alternatives
By JUDITH BURNS
Dow Jones Newswires
WASHINGTON -- The Securities and Exchange Commission announced
it is pulling the plug on plans to begin decimal-based stock trading on July
3, and instead will seek comment on two alternative proposals.
Under both proposals, decimal pricing would begin for New York Stock
Exchange issues first, and the Nasdaq Stock Market wouldn't join the
decimal party until 2001.
The first alternative would begin decimal pricing in all NYSE-listed stocks
by Sept. 4, as requested by House Commerce Committee Chairman
Thomas Bliley (R., Va.) and Reps. Michael Oxley (R., Ohio) and Edward
Markey (D., Mass.).
Under a second alternative, the SEC would
gradually phase in decimal trading for some
NYSE-listed stocks. Under a pilot program,
the NYSE and other exchanges would trade a
small number of securities in decimals, starting
Sept. 4, and the list would gradually expand to
include all listed securities by March 31, 2001.
Nasdaq, under both of these alternatives,
would begin trading in decimals by March 31,
2001, the SEC said.
The National Association of Securities Dealers, the parent company of
Nasdaq, had thrown a wrench into the SEC's plan to have U.S. markets
move to decimal trading beginning July 3, announcing its computers lack
sufficient capacity to handle the move.
Rivals, including the NYSE, say they are ready for decimal trading as early
as July 3, but SEC Chairman Arthur Levitt has expressed concerns about
having some markets trade in decimals, while others stick with fractions.
"The commission remains committed to implementing decimal pricing in a
timely and orderly manner," the SEC said. It added that it wants to solicit
comments to determine "how to implement decimal pricing in a way that
does not threaten the well-earned confidence that U.S. investors have
placed in our markets."
Although U.S. stock and option markets have traditionally priced securities
in dollars and fractions, early this year the SEC ordered them to switch to
decimals. For investors, the decimal switch is expected to reduce spreads
-- the difference between buying and selling prices -- and may lower costs
for transactions.
Despite the expected investor benefits, the SEC said it doesn't want to
rush into decimal trading. While two electronic communication networks,
Instinet Corp., a unit of Reuters PLC, and Island ECN, urged the SEC not
to delay the shift because of Nasdaq's computer problems, most
brokerage firms urged caution, the SEC noted. |
