Tuesday, February 6, 2001
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Posted on: Tuesday, February 6, 2001

Nasdaq goof makes momentary millionaires

USA Today

NEW YORK — Scott Widen was a millionaire for a few hours yesterday. His 7,000 shares of e.Digital, usually a $2.30 stock, were quoted on several Web sites at $209 a share.

But Widen’s paper profit turned out to be falsely created by some bad Nasdaq stock data sent to dozens of companies, including Ameritrade, Charles Schwab and AOL Time Warner, as well as Wall Street firms.

Yet for a few minutes yesterday morning, Widen, who lives in Bentonville, Ark., was smiling. "I joked with my wife that we made $1.5 million," he says.

Nasdaq blamed the problem on some stock-data vendors — including its two largest, Reuters Quotron and Bridge ADP — that are having problems making the switch to decimal prices. Nasdaq is expected to start quoting stocks in dollars and cents, instead of fractions, on April 9.

Some investors worry this could presage things to come, based on troubles at the New York Stock Exchange, which went decimal last week.

"We kind of wonder whether anyone is benefiting from this move to decimals," says Andrew Brooks, head stock trader at T. Rowe Price.

The Securities and Exchange Commission mandated the shift to decimal prices last year, hoping to save investors money by shrinking the spread between a seller’s asking price and a buyer’s bid. But as the spreads narrowed, specialists say they have had difficulty finding adequate supply and demand for stocks that trade in 1-cent intervals.

NYSE chief Richard Grasso said yesterday that he would form a committee to explore adjustments that might make decimal trading more successful.

While most of the problems with the quotes yesterday were fixed during the day, quite a few investors were shocked.

When Britt Conley checked her Ameritrade account in the morning, her 5,700 shares of NCT group were worth $260 each instead of the usual 26 cents.

"I just sat there for a few seconds," says the photo imaging specialist in Virginia, "and then I realized I wasn’t breathing."

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