13 Stocks Trading in Decimals
Aug. 28, 2000
NEW YORK (AP) _ Trading activity was light Monday for the 13 U.S. stocks that began trading in increments as small as a penny for the first time in American financial history.
The stocks _ seven on the New York Stock Exchange and six on the American Stock Exchange _ were quoted in decimals instead of fractions, the first step in a government-mandated switch designed to bring U.S. exchanges in line with other world markets.
NYSE Chairman Richard Grasso said Monday's transition was smooth, setting the table for the second stage of the pilot next month, when another 50 or so NYSE stocks shift to decimals.
``We've not heard of any glitches,'' he said. ``What today tells us is that all of the engineering work has proven itself in real market conditions, even though it was a slow market.''
Late August is historically a slow period for the market as summer winds down, and Monday's trading was no different. Stocks were mixed, with some some of the companies involved in the pilot program reporting slight gains, others losses.
One company did see a bump in volume: about 47,000 shares of MCS.Sofware Corp. were traded Monday, compared to average daily volume of about 29,400.
``That was one of the benefits we hoped to get by participating in this, more interest in the company and more clearly defined pricing levels,'' said Joanne Keates, director of investor relations for Los Angeles-based MCS.Software, which makes computer-aided engineering software.
MCS, which was selected for the pilot by an industry committee, ended Monday trading up 12.5 cents, or 1.3 percent, to $10.
But the spreads _ the difference between the price asked and the price bid for a stock _ did narrow for some of the 13 stocks.
Under the new system, a stock selling for $35 3/8 a share will now be priced at $35.375. Shares that were priced at $50 11/16 will be listed at $50.6875 or $50.69, if rounded to two places..
Under a fraction-based system, the smallest different between a bid and asking price was 1/16, about 6.25 cents. With decimals, the possibilities are potentially limitless, although, the pilot that began Monday restricts trading increments to 1 cent.
At one point Monday, the bid for shares of Memphis, Tenn.-based Federal Express Corp. was $40.87, compared to an asking price of $40.88. The company ended late trading at $40.71, down 1.3 percent of 54 cents.
``There's no question that the spreads between bids and asking prices will tighten,'' said John Murabito of Investec Ernst & Co. ``What's harder to predict right now is what the impact will be on overall trading volume.''
U.S. markets and exchanges have until April 9 to fully convert to decimals, per order of the Securities and Exchange Commission. The agency has been studying the issue for several years, but delayed an earlier implementation order after some industry members expressed concerns they would not be done in time.
The Nasdaq Stock Market, which has said it needs more time to prepare, is scheduled to begin its decimal phase-in during March and complete the change by the SEC deadline.
The shift comes more than 200 years of fractions, the use of which dates back to the late 18th century, when prices were tied to the Spanish currency that were based on increments of one-eighth.
Many newspapers have already converted their stock tables to decimals, based on the fractions still used on the exchanges, in anticipation of the shift. As of Monday, The Associated Press, the primary provider of U.S. newspaper stock tables, will only provide decimal figures. AP had been offering fraction and decimal stock tables.
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