The SEC has ordered the securities markets to begin quoting securities prices in decimals by July 3. The order, as issued in January and modified in March, requires the markets to submit a decimals-pricing implementation plan by mid-April and requires the options and equities markets to phase in decimal pricing by year-end. During the phase-in period, the markets can quote equity securities in price increments of up to five cents. The markets must also create and conduct a pilot program during the phase-in period in which a sample of securities will be quoted in one-cent increments.
At the end of the six-month phase-in period, the markets must submit a study to the SEC regarding the impact of decimal pricing on trading and capacity. In addition, the study is to address whether a uniform pricing increment is needed, and if so, what it should be. After completing the study, each market will be required to submit for SEC approval any rule changes needed in order to implement their chosen pricing increment.
NASD and other industry participants have said that they will likely have difficulties in meeting the July 3 deadline; however, the SEC remains committed to implementing decimal pricing in a timely and orderly manner.
"Decimal trading will benefit investors by allowing greater competition and making it easier to compare prices," SEC Chair Arthur Levitt said. "It will also bring about consistency with foreign markets, which now trade in decimals. We look forward to working with the industry to ensure that the transition to decimals goes smoothly." *
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