Nasdaq Board to Decide on Narrowing Fractional Increments of Stock Prices
WASHINGTON — The Nasdaq Stock Market board will decide today whether to follow the lead of the American Stock Exchange and recommend a narrowing of the fractional increments in which most stock prices are displayed.
U.S. stock markets, including Nasdaq, the nation’s second-largest market, express most stock prices in increments as small as one-eighth of a dollar, or 12.5 cents. The Nasdaq proposal would shave that to one-sixteenth of a dollar, or 6.25 cents, in an attempt to offer investors the possibility of more favorable stock prices.
“We will consider any move to greater transparency,†said Nasdaq spokesman Reid Walker. “What’s good for the investor is good for the market.â€
If Nasdaq’s board approves the staff recommendation, it will be forwarded to the board of the parent National Assn. of Securities Dealers for consideration April 10. The Securities and Exchange Commission has to approve the plan before it goes into effect.
The board of the AMEX, the nation’s third-largest stock market, approved a similar recommendation on March 13. AMEX said it will carry out the rule within two weeks of receiving SEC approval. The SEC has not commented on the AMEX or Nasdaq plans; nor has the New York Stock Market, the nation’s largest market.
The stock markets’ moves come as Congress considers legislation that would require the markets to express share prices in decimals. Under a decimal system, the increments would be in pennies, rather than 6.25 cents or 12.5 cents, potentially benefiting investors even more.
SEC Chairman Arthur Levitt has said the legislation would impose an undue burden on the securities industry when it is already trying to adapt its computer software to new SEC rules.
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