Updated from 10:43 a.m. EDT
Stock trading in decimals instead of fractions began Monday, as
, the electronic communications network of
Datek Online Holdings
, introduced dollar and cents pricing well ahead of the
New York Stock Exchange
Nasdaq Stock Market
The move enables customers of Island ECN, the second-largest electronic stock-trading network after
, to trade stocks in one-cent increments for some Nasdaq securities. Until now, stock prices had been quoted in fractions, usually in increments of 1/16 of a dollar, which equals roughly 6.25 cents.
Decimalization did little to increase trading volume at Datek on Monday. As of 10:45 a.m. EDT, Datek had recorded 22,000 trades in almost three hours of trading. In the last two weeks, Datek has averaged 100,000 trades a day, according to Mike Dunn, a spokesman for Datek Online.
But today is admittedly a slow trading day, since it is the day before the Independence Day holiday and falls during what many people are taking as a four-day weekend.
The conversion to decimalization is expected to narrow the spread between the bid price offered by buyers and the ask price offered by sellers. Market makers, which match buyers and sellers but often have to take one side of the trade to guarantee an orderly market, make money off the spread.
The New York Stock Exchange is now planning to began a trial program in September, trading 50 stocks in decimals. The Nasdaq expects to begin its decimal program in March 2001.
Instinet, a subsidiary of
( RTRSY), gave no timetable for when it will start trading in decimals, though it is ready to participate in the 50-stock pilot program for the NYSE.
"We would prefer that the whole industry moves together," said Terrance Mulry, a spokesman for Instinet. "Of course, we would prefer it sooner rather than later."
In January, the
Securities and Exchange Commission
told the stock and options markets to
start quoting prices in decimals on July 3. But
, the SEC chairman, delayed that deadline, prompted by an
admission by the
National Association of Securities Dealers
, which owns and runs the Nasdaq, that its systems wouldn't be ready by then to handle the increase in trade and message volume that's expected with trading in decimals.
Levitt's deadline delay was also prompted by volatile trading days, such as the April 4 Nasdaq swing of 638 points. With that swing, the Nasdaq automated trading system choked several times as volume hit 2.9 billion shares.
The New York Stock Exchange said it was ready to switch to decimal trading on July 3.
The delay has
angered some in
, who believe the shift to decimalization will save investors money. The decrease in the difference between the prices at which stocks are sold and bought theoretically makes stocks cheaper.
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