FRAMINGHAM (03/10/2000) - The National Association of Securities Dealers Inc.
(NASD) this week asked the Securities and Exchange Commission (SEC) to put off its plans to shift the nation's securities markets to decimal-based pricing until next year. The postponement would help the Nasdaq Stock Market Inc. and other entities increase their systems capacity to handle an expected threefold increase in data traffic with decimalization.
The Securities Industry Association (SIA) issued a statement in support of NASD's request. "This is a major undertaking for the industry, and we want to make sure that everything is done with as little risk as possible," said SIA spokesman Dan Michaelis.
In a letter sent to SEC Chairman Arthur Levitt this week, NASD Chairman and CEO Frank G. Zarb asked him to consider postponing the security industry's planned switch to pricing stocks in decimals rather than fractions. Slated to begin July 3, the move "would impose unacceptable risks" to the market because Nasdaq's systems won't be ready for the traffic increase in time, Zarb wrote.
A spokesman for the SEC said the agency had received the letter from NASD and "has no response at this time."
Nasdaq's quote-message traffic has more than tripled since 1998 because of an increase in stock trades, particularly technology stocks, and extended trading hours.
Nasdaq has seen a two-and-a-half-fold increase in quote and trade message traffic in the past nine months, said NASD spokesman Scott Peterson. That rate of increase could triple with decimalization, according to SRI Consulting, which produced the figures for a recent General Accounting Office report.
If the SEC moves ahead with the decimalization push on that schedule, slowdowns and crashes could result, said Gene Leganza, an analyst at Giga Information Group Inc. in Cambridge, Mass.
A delay in the transition would not only give Nasdaq extra time to build capacity, but it would also give some brokers a little breathing room.
Because decimalization would result in a drop in the spread between the selling and buying prices of stocks, some brokerages may see a drop in their revenues.