Newspaper article The Christian Science Monitor

Markets Pushed to Cut Trade Costs DECIMAL DEBATE

Newspaper article The Christian Science Monitor

Markets Pushed to Cut Trade Costs DECIMAL DEBATE

Article excerpt

Washington wants Wall Street to move without delay from fractions to decimals in pricing stocks.

Regulators are "no longer in the position to deny investors the billions of dollars of savings" from such a change, says Steven Wallman, a member of the Securities and Exchange Commission, which monitors the securities business.

Share prices quoted in decimals could move in smaller increments than fractions allow. This would, in effect, cut stock prices.

Under the old rules, for example, you might buy shares in XYZ Corp. for 10-5/8 or sell them for 10-4/8. Much of the "spread" between the buy and sell prices goes to the brokerage firm executing the transaction.

Mr. Wallman equates fractional pricing to price-fixing. It requires one-eighth of a dollar, 12.5 cents, as the minimum between a share's selling and purchase price. Decimalization would eliminate that minimum and allow smaller spreads, to the benefit of individual investors.

Institutional investors have sometimes been been able to narrow that spread because they trade in such huge quantities.

Mr. Wallman's statement implies that if the nation's stock markets do not drop their tradition of pricing shares in eights of a dollar (16ths since June 24) in favor of dollars and cents, the SEC will force the issue.

Congress also plans to keep the heat on.

Rep. Michael Oxley, chairman of the House Commerce subcommittee on finance, expects to hold a hearing in late September or October on the issue. The Ohio Republican is the prime sponsor of a bill aimed at introducing "decimalization. …

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