U.S. stocks start decimal trading
Monday marked the first day that investors could see New York-listed stocks trading in dollars and cents instead of fractions, such as eighths and sixteenths of a dollar.
For more than 200 years, all issues on the New York Stock Exchange have traded in fractions, a throwback to the "pieces of eight" made famous by Spanish coin. But beginning Monday, seven listed companies are now trading in pennies.
The stocks are Andarko Petroleum Corp., two issues from Forest City Enterprises, Gateway Inc., FedEx Corp., Hughes Supply Inc., and MSC Software Corp.
On September 25, the NYSE will expand the list to 50 stocks, which will include some of the world's most actively-traded issues, such as America Online and Compaq Computer.
The minimum price increment that the stocks can trade in is a penny.
The U.S. Securities and Exchange Commission (SEC) has set April 9, 2001, as a deadline for U.S. stock markets to list all prices in decimals.
The deadline was originally July 3 of this year, but it was changed to the new date after the Nasdaq said it needed more time to handle the quote traffic.
Now, the Nasdaq is set to start a decimal trading pilot program in March that is set to be completed by April, 2001.
On Monday, The American Stock Exchange also began its pilot program with six stocks.
The pilot programs are being closely watched to ensure that the exchanges' computers are able to handle the traffic, and accurately report the trades with decimals.
Decimal trading is already the standard practice with many exchanges across the world, and many big U.S. newspapers such as the Wall Street Journal and The New York Times are starting to quote some prices in pennies.
The U.S. financial channel, CNBC began quoting all U.S. stocks in dollars and cents Monday.
Canadian exchanges, including the Toronto Stock Exchange, converted from fractions to decimals in April, 1996, with the TSE taking about six months to complete the process.
Decimal trading is supposed to mean fairer and better trading for investors since it narrows the spread between the bid and asking price for a stock versus trading with fractions.