Saturday, February 17, 2001
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Posted on: Saturday, February 17, 2001

Decimal switch leads to a complaints board


Associated Press

NEW YORK — Nearly three weeks after shifting all of its trading to decimals, the New York Stock Exchange is setting up a committee to address complaints and concerns about its new policy.

Some of the exchange’s biggest customers have complained that trading stocks in penny increments rather than fractions, as before the conversion, is putting them at a disadvantage.

The use of decimals means stocks can be priced at 100 different points per dollar instead of increments of 1/16.

The problem, according to some institutional investors, is that their efforts to buy large blocks of stock are being blocked by specialists who step in at the last minute and bid a penny higher to buy stocks that institutional investors would have gotten otherwise. The specialists then resell the same shares at a higher price.

Specialists, the exchange’s equivalent of auctioneers, routinely buy and sell stocks to keep the market moving, and deny any wrongdoing. Institutional investors represent billions of dollars in assets for mutual funds, pensions and other plans.

Grasso said it’s too early to know whether the issues being reported are structural or just part of the adjustment, but he takes the complaints seriously.

The shift to decimals completed Jan. 29 was part of an industrywide change ordered by the Securities and Exchange Commission, which oversees the markets. The federal agency said penny pricing would make trading easier for investors to understand and make stock prices more competitive.

The Nasdaq Stock Market is expected to convert its trading to decimals by April 9, the SEC deadline.

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