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Decimals for 52 firms
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August 16, 2000: 6:00 p.m. ET
Big Board to expand decimal trading to 57 issues by Sept. 25
By Staff Writer Alex Frew McMillan
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NEW YORK (CNNfn) - The New York Stock Exchange on Wednesday announced plans to trade the stocks and other investment instruments of 52 companies in decimals as of Sept. 25.
That is slated to be Phase 2 of the NYSE's switch to decimal trading. The exchange is set to start trading seven issues, from six companies, in decimals on Aug. 28.
In addition to stocks, some companies offer other investment instruments such as preferred stock and corporate bonds. Some of those will also be among the 57 issues the NYSE will start to trade in decimals.
The move toward decimal trading should benefit investors by bringing more-efficient pricing. Many traders expect decimals to result in a decrease in the spread, the difference between the bid price and the ask price on a stock.
Most of the rest of the world's markets already trade in decimals. Most investors consider decimals easier to use than the current U.S. fractional system, with quarters, eighths and "teenies." That dates to the Spanish "pieces of eight" coin, which could literally be split into eighths.
The list of 52 companies includes such big-cap stocks as America Online, Colgate-Palmolive, Compaq Computer, DaimlerChrysler, Goodyear Tire & Rubber, Sears Roebuck, CNNfn.com parent company Time Warner, and UBS AG.
A mix of issues across the trading floor
The NYSE, in a release, said it chose the 52 companies to reflect a variety of trading volumes. It also chose them to make sure that decimal trading will be spread throughout the NYSE trading floor, to give more traders a chance to trade in decimals.
In contrast, the NYSE's first phase of decimal trading will occur in issues controlled by only one specialist firm, Spear Leeds & Kellogg. Specialists, the NYSE equivalent of Nasdaq's market makers, monitor trading in stocks to make sure it is orderly. Groups of traders gather in front of the specialists' stations on the floor of the NYSE.
The NYSE said that it, the securities industry, and regulators would review the NYSE's move to decimals around 60 days after Phase 2 trading begins. It would then decide whether to extend decimals to all NYSE stocks.
Nasdaq has been slower in converting trading in its own issues to decimals. Nasdaq trading volume rose rapidly in the fourth quarter of 1999 and the first quarter of 2000 as online trading and day trading caught on.
A Nasdaq spokesman said the electronic market was working with the NYSE to offer trading in the seven Phase 1 NYSE stocks and 57 Phase 2 stocks "off the floor," via Nasdaq's systems. Members of Nasdaq's parent, the National Association of Securities Dealers, trade about 9 percent of the volume in NYSE stocks through Nasdaq's system, according to the spokesman.
The NASD said Nasdaq missed an SEC deadline to switch to decimals by July because of capacity problems. Nasdaq still plans to convert all trading in its own issues to decimals by April 9, 2001, in line with a Securities and Exchange Commission order. Nasdaq will start a limited rollout of decimal trading by March 12, 2001.
The 57 issues, from 52 companies
The NYSE stocks that will be traded in decimals on Sept. 25 are, in alphabetical order:
Adecco SA (ADO: Research, Estimates)
Administaff Inc. (ASF: Research, Estimates)
America Online Inc. (AOL: Research, Estimates)
American Retirement Corp. (ACR: Research, Estimates)
Apex Mortgage Capital Inc. (AXM: Research, Estimates)
Cigna Corp. (CI: Research, Estimates)
Colgate-Palmolive Inc. (CL: Research, Estimates)
Colonial Investment Grade Municipal Trust (CXH: Research, Estimates)
Community Bank System Inc. (CBU: Research, Estimates)
Compaq Computer Corp. (CPQ: Research, Estimates)
DaimlerChrysler AG (DCX: Research, Estimates)
Daimler Benz AG 5.75% Convertible notes (DAJ: Research, Estimates)
Groupe Danone (DA: Research, Estimates)
Donnelly Corp. (DON: Research, Estimates)
Duff & Phelps Utilities Tax-Free Income fund (DTF: Research, Estimates)
Enel Societa Per Azioni (EN: Research, Estimates)
Factset Research Systems Inc. (FDS: Research, Estimates)
General Motors Corp. Class H shares (GMH: Research, Estimates)
Goodyear Tire & Rubber Co. (GT: Research, Estimates)
Lockheed Martin Corp. (LMT: Research, Estimates)
Harcourt General Inc. (H: Research, Estimates)
Harman International Industries Inc. (HAR: Research, Estimates)
High Yield Plus Fund Inc. (HYP: Research, Estimates)
HSBC Holdings PLC (HBC: Research, Estimates)
Iomega Corp. (IOM: Research, Estimates)
Kemper Strategic Municipal Income Trust (KSM: Research, Estimates)
The Korea Fund (KF: Research, Estimates)
Lands' End Inc. (LE: Research, Estimates)
Lone Star Technologies Inc. (LSS: Research, Estimates)
Martin Marietta Materials Inc. (MLM: Research, Estimates)
McMoran Exploration Co. (MMR: Research, Estimates)
Morrison Management Specialists Inc. (MHI: Research, Estimates)
Morgan Stanley Dean Witter 2003 S&P 500 Bridges (BGS: Research, Estimates)
M&T Bank Corp. (MTB: Research, Estimates)
Newhall Land and Farming Co. (NHL: Research, Estimates)
NS Group Inc. (NSS: Research, Estimates)
Pulitzer Inc. (PTZ: Research, Estimates)
Royal Caribbean Cruises Inc. (RCL: Research, Estimates)
Sears Roebuck Co. (S: Research, Estimates)
Sears Roebuck Acceptance Corp. 7.00% notes (SRF: Research, Estimates)
Sears Roebuck Acceptance Corp. 6.95% notes (SRH: Research, Estimates)
Shangdong Huaneng Power Development (SH: Research, Estimates)
State Street Corp. (STT: Research, Estimates)
Stone Container Exchangeable Convertible preferred stock (STO-E: Research, Estimates)
Stone Energy Corp. (SGY: Research, Estimates)
Tejon Ranch Co. (TRC: Research, Estimates)
Tribune Co. Exchangeable Subordinate Debentures (TXA: Research, Estimates)
Time Warner Inc. (TWX: Research, Estimates)
Time Warner Inc. Cap 18-7/8% preferred stock (TWX-T: Research, Estimates)
UBS AG (UBS: Research, Estimates)
Valspar Corp. (VAL: Research, Estimates)
Van Kampen Investment Grade Municipal Trust (VIG: Research, Estimates)
Watsco Inc. (WSO: Research, Estimates)
Phase 1 of the NYSE plan
The first phase of decimal trading will mean the following issues trade only in digits by the end of this month:
Andarko Petroleum Corp. (APC: Research, Estimates)
FedEx Corp. (FDX: Research, Estimates)
Forest City Enterprises Inc. Class A shares (FCE.A: Research, Estimates)
Forest City Enterprises Inc. Class B shares (FCE.B: Research, Estimates)
Gateway Inc. (GTW: Research, Estimates)
Hughes Supply Inc. (HUG: Research, Estimates)
MSC.Software Corp. (MNS: Research, Estimates)
Decimals bring a benefit to all
"This is what we're all anticipating," Bernie Madoff, chairman of Bernard L. Madoff Securities, said. He added that the NYSE's move "is a step in the right direction."
Some specialists and market makers believe decimals and smaller spreads will mean an increase in quote traffic and a decline in profitability. But Madoff, whose own firm is one of the biggest trading houses, thinks those fears are misguided.
"I feel this should have a beneficial effect on everybody - for the investor, obviously, but it will make trading more efficient," said Madoff, who sits on the Securities Industry Association trade group's trading and market structure committees.
"The critics who think this will be detrimental, I think they will be proven wrong again," he added. Narrower spreads "always have a long-term beneficial effect" by encouraging better pricing and more trading, he said.
Nasdaq not 'dragging their feet'
Madorf said it would be a mistake for the NYSE to make too much of its being "first to market" with decimals. "Nasdaq is working feverishly to get ready to do this," he said.
"I don't think that it's that they're dragging their feet," to protect members' profits, Madoff said. "I know for a fact this is a No. 1 priority."
"If Nasdaq had experienced the relatively flat growth in its trading shares [volume] and its trades, then it would have been a lot easier for us to switch over to decimals earlier," said Nasdaq media-relations director Scott Peterson. "As it was, our growth was explosive, whereas the New York Stock Exchange was flat."
The NYSE did not immediately return phone calls for comment.
"The New York Stock Exchange should be applauded for moving forward," said U.S. Rep. Vito Fossella (R-N.Y.), a member of the House Commerce Committee who has led the push to decimal trading. "This will make it easier for investors to trade, while ensuring the integrity of the market." 
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