SEC Holds Off on Decimal Pricing

The Securities and Exchange Commission on Monday formally postponed the scheduled July start date for converting U.S. securities markets to decimal prices, saying it may instead conduct a limited test of New York Stock Exchange-listed stocks this fall.

“In a time of unprecedented volume and volatility, I believe it would be ill-advised to force a major structural change in our markets without the confidence that order will be maintained,” SEC Chairman Arthur Levitt said in a letter to Congress.

Levitt, in lifting the July 3 switch for all markets, cited Nasdaq’s inability to convert from fractions to dollars-and-cents pricing until early next year. The SEC chairman said he will seek comment from industry participants about whether to begin a pilot program of “a select number of listed stocks” in the fall. These listed stocks might include those traded on the NYSE, the American Stock Exchange and the regional stock markets. These exchanges have said they will be ready for decimal pricing by September.

Three senior members of Congress asked the SEC chairman last week to begin decimals trading on the NYSE by September even if Nasdaq isn’t ready by then. They cited the potential savings to investors from the soonest possible introduction of decimals on any market that is ready.

Levitt expressed concern that technical problems could result from allowing one market to trade in decimals while another quotes prices in fractions of a dollar.

Levitt and Congress have pushed for decimal pricing to narrow trading spreads, the difference between buying and selling prices. The markets currently trade in fractions (typically sixteenths, or 6.25 cents), although some publications, including The Times, already report all prices in decimals.

The SEC chairman also said the agency won’t delay approval of the Nasdaq Stock Market’s “supermontage” proposal to centralize trading of most customer orders.

Some Congress members last week had asked the SEC to hold off on that plan until Nasdaq fully converts to decimal pricing. But Levitt said it would “be a mistake to defer the approval process as a punitive measure against Nasdaq.”