Stock Exchanges Submit Decimalization Plan

FRAMINGHAM (07/28/2000) - Hewing to an order issued by the U.S. Securities and Exchange Commission (SEC) last month, the major stock exchanges and the National Association of Securities Dealers Inc. this week submitted a detailed plan for phasing in decimal-based pricing of securities starting next month.

The U.S. is the only country that continues to use fractions in stock pricing.

But under the plan announced by the SEC Wednesday, 13 stocks and related options listed on the New York Stock Exchange are scheduled to begin being priced in decimals Aug. 28.

If all goes as planned, the SEC said, decimal pricing will be expanded to another 50 to 100 stocks Sept. 25, with all other exchange-listed stocks following as early as December. But the commission added that the decision to go ahead with a full conversion of exchange-listed stocks to decimal pricing "will be based on an assessment of industry readiness."

Exchange-listed don't include the securities traded on Nasdaq Stock Market Inc., which in March asked the SEC to delay the conversion to decimalization in order to give Nasdaq more time to beef up the capacity of its systems to handle an expected increase in message and order traffic. Decimalization is expected to drive up transaction-processing volumes -- particularly for price quotes requested by investors -- because stocks will be priced in smaller increments that will change more rapidly than fraction-based prices do.

The SEC eventually agreed to give Nasdaq until next March to begin converting the stock it lists to decimal pricing, a schedule Nasdaq officials have vowed they will meet. According to the plan submitted this week, all stocks listed in the U.S. are due to be converted to decimal pricing by April 9 of next year.

In a statement, SEC Chairman Arthur Leavitt said decimalization "has the potential to significantly benefit investors and to make our [stock] markets more competitive internationally." The SEC will review the details of the plan in the next few weeks and work closely with the securities industry "to ensure that decimal conversion is implemented in a safe and orderly manner," Leavitt added.

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