Do Bailar & Burns really believe that investors and computers have trouble with DECIMALS? Tremendous volume last week... computers can't handle it? What happen to the 4 billion transactions a day the Nasdaq computers could handle just 6 months ago? The Wall Street Journal RAG line...
Copyright ¸ 2000 Dow Jones & Company, Inc. All Rights Reserved.
May 26, 2000
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Nasdaq's Conversion to Quoting Stocks
In Decimals Could Cost $230 Million
By JUDITH BURNS
Dow Jones Newswires
WASHINGTON -- The U.S. stock markets' conversion to pricing stocks in decimals, rather than fractions, isn't coming cheap.
The Nasdaq Stock Market expects to spend as much as $130 million to convert its computer systems to quote prices in dollars and cents (rather than dollars and fractions), a senior official said Thursday.
"We've spent nearly $100 million already," and the conversion will probably wind up costing Nasdaq an additional $10 million to $30 million, said Gregor Bailar, an executive vice president and chief information officer for the National Association of Securities Dealers, Nasdaq's parent company. In a news briefing, Mr. Bailar said about half the spending thus far has been on computer hardware, with software and personnel costs accounting for the remainder.
Nasdaq Won't Block Decimal Trading by Other Stock Markets, NASD Says (May 19)
SEC Drops Plans for Decimal Trading in July, Seeks Comment on Alternatives (April 14)
NASD Says Nasdaq Will Be Ready for Decimalization by Early 2001 (April 3)
Despite the spending, Nasdaq's systems won't be able to accommodate decimal trading by July 3, the deadline ordered by the Securities and Exchange Commission in January. In March, Nasdaq announced that it lacked sufficient computer capacity to handle the switch. It has since pledged to be decimal-ready by April 2001.
Mr. Bailar said making the move to decimals this year would have been "imprudent" and attributed the delay to an unexpected surge in trading volume on the Nasdaq. "Nasdaq has seen exceptional volume growth," said Mr. Bailar, pointing to the record 2.8 billion shares that traded on the Nasdaq on April 4. Average daily volume for the first quarter of this year has been about two billion shares, he added, twice the rate for 1999. In addition, the growing number of small investors means the average transaction on Nasdaq is now for just 625 shares, far less than when institutional buyers dominated; all those tiny transactions generate much more computer-message traffic than large, block trades.
More message and transaction volume are putting unanticipated strains on Nasdaq's computers, including its "legacy" computer, a single Unisys system that can execute, report and confirm trades in decimals, but that still quotes bids, offers and prices in fractions.
With help from Unisys Corp., Blue Bell, Pa., Nasdaq managed to torque up the old system to expand its capacity. But Mr. Bailar said decimal conversion won't be complete until February.
While Nasdaq won't stand in the way of other U.S. stock markets' trading in decimals this year, Mr. Bailar said it doesn't favor that approach. "We think it's confusing for the public" to have some stocks priced in decimals and others in fractions, he said.
The New York Stock Exchange has said it is ready to convert to decimal trading this year. The SEC hasn't announced whether it will order U.S. markets other than Nasdaq to adopt decimal pricing this year, or limit decimal trading to a few listed stocks, in a pilot program.
An SEC spokesman said, "We are considering a variety of things and we have not decided on the path we will take." An announcement is expected in June.
Write to Judith Burns at judith.burns@dowjones.com
Copyright ¸ 2000 Dow Jones & Company, Inc. All Rights Reserved. |
