Securities Pricing: Trading Volumes and NASD System Limitations Led to Decimal-Trading Delay
GENERAL ACCOUNTING OFFICE WASHINGTON DC GENERAL GOVERNMENT DIV
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This report responds to your April 27, 2000, request that we examine the progress that the securities industry has made toward the implementation of decimal pricing for U.S. stocks. The U.S. equity markets are the only major equity markets in the world that still use fractional pricing and some observers have projected significant savings to investors following the implementation of decimal pricing. In January 2000, the Securities and Exchange Commission SEC issued an order requiring all stocks and options exchanges and the National Association of Securities Dealers, Inc. NASD, which administers the Nasdaq Stock Market, Inc., to develop a plan that would ensure that decimal trading would begin by July 3, 2000. However, in March 2000, NASD officials announced that they would not be able to meet this deadline. As a result of this announcement, SEC suspended the order requiring the markets to implement decimal trading by July 3, 2000. On August 28, 2000 after SEC issued a new order, a small number of stocks and options began trading in decimal prices, and a new phased schedule for the implementation of decimal trading was put into place. This schedule called for all securities to be quoted and traded in decimals by April 9, 2001.
- Economics and Cost Analysis