SEC Postpones Stock Decimalization Shift

FRAMINGHAM (04/11/2000) - The Securities and Exchange Commission has decided to postpone its planned July 3 cutover from fraction to decimal stock pricing.

However, the agency hasn't yet set another date for the changeover.

The SEC said it based its decision on the National Association of Securities Dealers Inc.'s (NASD) request to postpone the cutover date due to the Nasdaq Stock Exchange's current inability to handle the extra traffic generated by the switch.

The New York Stock Exchange, however, has said it will be ready for the conversion on Sept. 4.

In an April 7 letter to lawmakers that was released yesterday, SEC Chairman Arthur Levitt said, "I am as eager as you are to have our markets move to decimals. ... But the process of moving to decimals - especially on different schedules - is not without its peril."

Levitt also said that "in light of Nasdaq's recent announcements, I simply cannot commit to a transition program without a sound basis for believing it is consistent with (protecting) investors and the maintenance of orderly markets."

If after an intensive SEC review it becomes apparent that the shift to decimalization won't "impair investor protection and public confidence," Levitt said he will then support the move.

In a letter sent to the SEC last week, NASD Chairman and CEO Frank G. Zarb asked Levitt to consider postponing the security industry's planned July 3 switch to decimalization, saying the move, "would impose unacceptable risks" to the market because Nasdaq's systems won't be ready for the traffic increase in time.

A spokesman for the NASD declined to comment on Levitt's decision.

Nasdaq's quote-message traffic has more than tripled since 1998 because of an increase in stock trades and extended trading hours.

NASD spokesman Scott Peterson said Nasdaq has seen a two-and-one-half times increase in quote and trade message traffic over the past nine months.

According to a report by SRI Consulting, that rate of increase could triple with decimalization.

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