Long-promised decimals are coming to Wall Street

Major stock markets must convert by April 9

July 30, 2000|By Bill Deener | Bill Deener,DALLAS MORNING NEWS

With so much brainpower on Wall Street, changing the pricing of stocks from fractions to the more customer-friendly decimals should be, well, a no-brainer.

But the U.S. securities industry has been jawboning about reporting stock prices in dollars and cents rather than fractions for about four years now, and yet nothing has changed.

In the latest development, the U.S. Securities and Exchange Commission said in June that the major stock markets have until April 9 to price stocks in dollars and cents instead of fractions.

The new pricing system was supposed to kick off this summer but was delayed. After years of foot-dragging by the securities industry, investors probably should view the new deadline with a skeptical eye. However, industry officials say it's really going to happen this time, and most market experts agree.

"We are very confident about converting this time," said Scott Peterson, a spokesman for the Nasdaq stock market. The New York Stock Exchange says it's ready, too.

Earlier this year, the SEC asked the major exchanges and the National Association of Securities Dealers, which operates the all-electronic Nasdaq, to begin using decimals by July 3. In other words, a stock at the current price of 7 1/8 would be listed as $7.125.

The NYSE said it could meet the deadline, but the Nasdaq said its computer system was so overwhelmed with record trading volume it couldn't meet the deadline.

The SEC said it was "dismayed and disappointed" that Nasdaq officials couldn't meet the deadline, but granted them more time and asked the NYSE to wait until the NASD was ready.

With virtually every stock market in the world pricing in decimals, continuing to trade in fractions has begun to look rather antiquated, industry experts say. Hundreds of newspapers and Web sites display stock prices in decimals.

Peterson said Nasdaq trading volume "exploded" in late 1999 and early 2000 - hitting a record 2.89 billion shares April 4 and consistently averaging more than 1.3 billion shares daily. That's twice the volume of a year ago, he said.

The daily volume at the NYSE has increased, too, but at a much slower pace. It now averages about 1 billion shares a day.

"If our volumes would have remained relatively static, then it wouldn't have been so much of a problem to add on decimalization," Peterson said.

The Nasdaq has spent about $100 million on converting to decimals - mostly for additional computing power - and probably will spend another $30 million before it's ready, he said.

The NYSE has spent $30 million, but that's a rough estimate because the exchange is constantly updating its technology, and it's hard to determine the amount spent directly on decimalization, said spokesman Ray Pellechia.

The NYSE will begin a pilot program in decimal pricing of 50 stocks in September, then expand it to all 3,100 NYSE-listed stocks by the April deadline. These stocks will be quoted down to the penny, but the SEC has given the markets the option of trading in increments of up to a nickel.

Peterson said Nasdaq would be ready to quote in penny increments or a nickel, "whatever the SEC likes. We are agnostic on that point."

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