ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Friday, March 14, 1997 TAG: 9703140042
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: ASSOCIATED PRESS
WASHINGTON
The United States is the only country whose markets still use fractions.
Seeking to point U.S. stock markets toward the 21st century, House lawmakers unveiled a proposal Thursday to require dollars-and-cents pricing for shares. They said it would save investors money on trading costs.
The securities industry has resisted such a change. But lawmakers of both parties, backed by a key federal regulator, insist it's time to scrap the traditional system of quoting prices in one-eighth increments - which they say fills brokers' pockets at the expense of consumers.
The Toronto Stock Exchange in Canada recently converted to decimal pricing, making the United States the only country whose markets still use fractions. Proponents say adopting decimal pricing would narrow the difference between a stock's best bid and asking prices, known as the spread. Spreads typically vary from 12 1/2 (one-eighth) cents to 50 cents, an amount that adds up to a sizable profit for brokers, who usually mark up stock prices before selling them to investors.
The American Stock Exchange, meanwhile, approved a proposal to adopt minimum trading increments of one-sixteenth of a dollar (6 1/4 cents) for all its stocks, saying it would benefit investors. A spokeswoman said the move was unrelated to Thursday's decimal push in Congress and the timing was a coincidence.
Some stock exchange and securities industry officials say the switch would be prohibitively expensive because of the new technology required.
The legislation would require the Securities and Exchange Commission to adopt a rule for dollars-and-cents pricing within a year of the bill's enactment. But it would allow the market watchdog agency to determine the new minimum price increments.
SEC Chairman Arthur Levitt Jr. has not taken a public position on the issue. He issued a noncommittal statement saying that decimalization ``raises important questions as we approach the 21st century and it requires a close study of the changes required and the benefits for our markets.''
The traditional system traces its origin to the Spanish dollar, which was widely used in the mid-18th century when the New York Stock Exchange was founded. The Spanish currency was divided into eighths, known as ``pieces of eight'' or ``bits.''
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