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NYSE to Switch to Decimal System by January 2000

From Washington Post

The New York Stock Exchange is expected to announce today that it will begin trading stocks in dollars and cents, rather than in fractions, no later than January 2000, according to Rep. Michael G. Oxley (R-Ohio), who was briefed on the matter Wednesday by exchange officials.

Oxley, who is chairman of the House securities subcommittee, said the briefing confirmed a news report Wednesday that the NYSE board would vote today to end its convention of quoting stocks in increments of an eighth of a dollar, or 12.5 cents, and move to sixteenths, or 6.25 cents. The exchange plans then to move to the decimal system--dollars and cents--within 2 1/2 years, Oxley said.

Oxley and Rep. Edward J. Markey (D-Mass.), a member of the subcommittee, are co-sponsors of a bill that would compel U.S. stock markets to convert to decimal pricing, which would be easier for investors to understand and which should lower the cost of trading stocks.

About 20% of the trading on the exchange is conducted between specialists, who stand ready to buy and sell specific stocks at quoted prices, and public customers. The specialists now take at least an eighth of a dollar on each share when trading with the public. This amount, known as the spread, is the specialist’s profit.

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A move to a smaller increment of pricing, such as sixteenths of a dollar, or even pennies, would allow competitive pressures to narrow the spread, benefiting the customer on the other side of the trade.

A commitment by the NYSE to start quoting stocks in dollars and cents would be a dramatic reversal by the world’s biggest and best-known stock exchange.


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