The stock markets attempt to switch from fracitonal to decimal system of stock pricing is endangered by you guessed it: y2k problem.
Subj: Wall St. Needs Decimal Switch Delay
Date: 97-10-20 17:26:48 EDT
From: AOL News
BCC: Stone151
.c The Associated Press
By MARCY GORDON
WASHINGTON (AP) - A few months after hailing the New York Stock
Exchange's decision to adopt dollars-and-cents share prices, top
securities regulators have told Congress that Wall Street may not
be ready in time.
Arthur Levitt Jr., chairman of the Securities and Exchange
Commission, and Frank Zarb, head of the National Association of
Securities Dealers, asked lawmakers last week to approve a delay in
the planned switch by the nation's stock exchanges to decimal
prices from the 200-year-old use of fractions.
Levitt and Zarb told some members of the House Commerce
Committee that the switch would interfere with the securities
industry's efforts to deal with year 2000 computer problems.
''There are issues to consider, such as year 2000. It's not just
something you turn a switch on for,'' Reid Walker, a spokesman for
Zarb, said Monday.
Rep. Michael Oxley, R-Ohio, chairman of the Commerce
subcommittee on finance, and other lawmakers met with the
regulators last week to discuss the issue, said Oxley's
spokeswoman, Peggy Peterson. ''It's in the discussion stages right
now,'' she said.
Levitt spokesman Christopher Ullman had no immediate comment on
the development, which was first reported in Saturday's Washington
Post.
In a surprising move, the NYSE voted in June to begin trading in
decimals ''as soon as the essential systems are in place in the
securities industry,'' predicting its own computer trading systems
will be ready in less than a year. It said it believes the industry
should be prepared to convert to decimals by January 2000.
The Big Board still is ready to go to decimals by next June, but
would delay the move until other exchanges and Wall Street
brokerages are prepared to do so, NYSE spokesman Ray Pellecchia
said Monday.
The nation's oldest and largest exchange had previously been
lukewarm about such a change, but appeared to succumb to pressure
to ''go decimal'' from competing exchanges and House lawmakers
pushing a bill to mandate such a change. The voluntary move by the
Big Board appeared to knock the wind out of the congressional
effort.
Levitt has previously noted that Wall Street, with its
complexity and heavy reliance on computers, faces a particularly
serious test in preparing itself for the year 2000. He has said
securities firms are making a strong commitment of time and money
to convert their computer systems, knowing they could find
themselves out of business otherwise.
With the Big Board making the leap to the decimal system, other
U.S. stock exchanges are expected to do the same. The United States
is the only major nation that does not use the decimal system in
its stock trading.
As an interim step, the nation's three biggest exchanges - the
NYSE, the Nasdaq Stock Market and the American Stock Exchange - and
some regional exchanges have begun quoting stocks in minimum
increments of one-sixteenth of a dollar, instead of the customary
one-eighths. In decimals, a sixteenth is 6.25 cents and an eighth
is 12.5 cents.
Supporters say adopting the decimal system would narrow the
difference between a stock's best bid and asking prices, known as
the spread. Spreads typically vary from 12 1/2 cents to 50 cents, an
amount that adds up to a sizable profit for brokers, who usually
mark up stock prices before selling them to investors.
A narrower spread, it is argued, would increase the
competitiveness and efficiency of markets, increase trading volume
and improve liquidity.
By contrast, critics have said the narrower spreads in decimal
trading would erode profits, something that could reduce the number
of market makers, the firms which form a market's backbone. Market
makers trade for their own accounts and agree to process customers'
orders for particular stocks. A sharp drop in market makers could
hurt an exchange's ability to handle high-volume trading sessions.
AP-NY-10-20-97 1720EDT |
