Nasdaq May Challenge 1-Cent Trading Concept

The Nasdaq Stock Market might fight the New York Stock Exchange’s idea of trading stocks in 1-cent increments when decimal trading arrives.

Nasdaq Chairman Frank Zarb said the entire U.S. securities industry should introduce dollars-and-cents stock quotes in 5-cent increments.

Zarb’s comments put the second-largest U.S. stock market at odds with the NYSE, which has said it wants to let stock quotes move up or down by as little as a penny.

A top Securities and Exchange Commission official said last week the federal regulatory agency is preparing to let the NYSE proceed with its plan later this year.

But Zarb said Wednesday that the NYSE and Nasdaq should follow a coordinated approach that begins with modest change.

“We need to be sure we completely understand the quality-of-markets impact, and make a careful measurement each step of the way,” Zarb said in an interview. “Investors need to be benefited and protected.”

Zarb said the NYSE and Nasdaq together should start quoting stocks in 5-cent increments, either in a pilot program or in a full-scale introduction.

Nasdaq has previously said that moving to 1-cent increments would cause it computer-capacity problems, at least initially.