Traders Say Reg FD And Decimals To Have Big Impact On Securities Industry, According To The STA
Business Editors
NEW YORK--(BUSINESS WIRE)--Jan. 10, 2001--Securities industry
professionals say the Security and Exchange Commission's (SEC)
Regulation FD and decimal pricing are the two developments that
occurred in 2000 that will have the greatest impact on the future of
the markets, according to the Security Traders Association's (STA)
annual year-end membership poll.
The impact of these developments, however, may not have a positive
effect, at least in the short run.
According to the poll, one-third of the 457 respondents said the
initial implementation of decimal pricing will have the most impact on
the securities industry in the future, while nearly a quarter said it
is the implementation of the SEC's Regulation FD. Regulation FD was
designed to ensure that all investors have equal access to corporate
information that can affect stock prices.
"Reg FD concerns traders because of the potential for an increase
in the number of earnings surprises and the volatility it will cause
in the markets," said Lee Korins, STA's president and chief executive
officer. "Until companies sort out the new regulations and determine
what they can say to whom and when they can say it, they are more
likely to say nothing to anyone. Reg FD, therefore, may have an
unintended consequence, until market participants get accustomed to
it."
Decimalization Still a Concern to Traders
"Our latest poll also shows that concern over decimalization
persists in the minds of industry professionals. Past polls have made
it clear traders are concerned with the ability of the information
infrastructure to handle the increased quote traffic decimal pricing
will generate. That concern will not dissipate until all stocks are
traded in decimals and the data systems prove they can handle the
traffic. A wiser approach would have been to use nickel increments
before moving to pennies," Mr. Korins added.
Another one in five respondents believe Nasdaq's SuperMontage, a
central order display system, was the development that will have the
greatest future impact, while 14.4 percent chose after-hours trading.
Only 4.5 percent picked the demutualization of Nasdaq.
Interest Rates Biggest to Have Greatest Impact This Year
When asked what will have the biggest impact on the markets in
2001, nearly half (48.5 percent) said Federal Reserve action on
interest rates. This was evidenced last week when the market soared
after the Fed cut rates by one-half of a percentage point. Also viewed
by a significant number of poll respondents as an issue for 2001 is
Nasdaq's SuperMontage, with nearly a quarter choosing it over proposed
SEC rules requiring the disclosure of order execution quality (16.6
percent), payment for order flow (3.7 percent) and internalization of
order flow (1.9 percent).
"The reason for concern over SuperMontage is that it will change
the method of order handling, making Nasdaq more automated," Mr.
Korins said. "Traders will need to learn how to operate in the new
environment."
Traders See only Modest Increases this Year in the Dow and Nasdaq
When asked for their predictions on where the Nasdaq will be at
the end of 2001, more than half said it will fall between the three
and four thousand level, in contrast with an nearly equal percentage
who one year ago thought the Nasdaq would end last year at the 5,000
point level. While one year ago most investors were extremely bullish
on the markets, nearly 15 percent of traders responding to 1999's
end-of-year poll got it right - that the Nasdaq would retreat in 2000
from its then current level of about 4,000.
Poll respondents have only mediocre expectations for the Dow Jones
Industrial Average when 2001 comes to a close. Nearly one in two
predict the Dow will end the year between 11,000 and 12,000. In last
year's poll, 40 percent guessed the Dow would exceed the 13,000 level
at the end of 2000. About 12 percent correctly predicted that the Dow
would fall below its end of 1999 level by the conclusion of 2000.
By an overwhelming plurality for the second year in a row,
industry professionals chose Alan Greenspan as the markets' most
influential individual - 83.5 percent - far outpacing the other names
on the list. Political heavyweights were not perceived as influential
in the markets, with President Bill Clinton, George W. Bush and Al
Gore getting only 3 percent of traders' votes combined.
The poll was conducted from December 18 through January 5, with
457 STA members responding.
STA represents more than 7,000 professionals engaged in the
buying, selling and trading of securities. The organization works to
improve the ethics, business standards and working environment for
those professionals through 30 local affiliate organizations in the
U.S., Canada and Europe. STA is the largest such organization in the
world.
Complete poll questions and responses follow.
QUESTIONS AND RESPONSES - STA YEAR-END 2000 MEMBER POLL
1. Among major developments or occurrences in 2000, which one will have the most impact on the securities industry in the future?
Implementation of the Securities and Exchange
Commission's Regulation FD
23.1%
The initial implementation of decimal pricing
33.6%
Nasdaq's SuperMontage proposal
20.5%
The initial steps to demutualize Nasdaq
4.5%
ECNs and regional exchanges instituting
after-hours trading
14.4%
None of the above/no opinion
3.5%
2. What issue do you expect to have the biggest impact on the markets in 2001?
Implementation of SuperMontage or other central order display
24.7%
SEC's new rules requiring disclosure of order
execution quality by brokers and market centers
16.6%
Federal Reserve action on interest rates
48.5%
Internalization of order flow
1.9%
Payment for order flow
3.7%
None of the above/no opinion
4.3%
3. The SEC's new rules requiring disclosure of order execution quality will (choose the one you feel most strongly about):
Benefit investors by acting as an incentive
to find the best price
26.0%
Harm investors by slowing down the execution
process
20.5%
Encourage the discontinuation of payment for
order flow
17.0%
Encourage the discontinuation of internalizing
order flow
3.5%
Be detrimental to regional exchanges and small
execution centers
13.5%
None of the above/no opinion
19.2%
4. To comply with the SEC's new rules of disclosure, your firm's costs will increase:
Substantially
16.4%
Modestly
26.9%
Not at all
17.0%
Don't know/no opinion
39.6%
5. Which person had the greatest impact on the markets during the year?
George W. Bush 1.9%
Bill Clinton 0.2%
Al Gore 1.0%
Phil Gramm 0.0%
Richard Grasso 0.4%
Alan Greenspan 83.5%
Jim Leach 0.2%
Arthur Levitt 8.0%
Frank Zarb 0.2%
None of the above/no opinion 4.1%
6. At what level do you see the Nasdaq at the end of 2001?
Less than 1,000
0.8%
1,000 to 2,000
5.2%
2,000 to 3,000
30.1%
3,000 to 4,000
51.6%
4,000 to 5,000
10.5%
More than 5,000
1.5%
7. At what level do you see the Dow Jones Industrial Average at the end of 2001?
Less than 9,000
4.3%
9,000 to 10,000
7.0%
10,000 to 11,000
25.8%
11,000 to 12,000
45.9%
12,000 to 13,000
13.3%
More than 13,000
3.5%
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