What we can do is look at the issue as it stands now, at its nascence, and at least get a feel for it. The securities industry decided that since it successfully rode through the Y2K challenge, it could take on the project of decimal pricing of stocks and options. The decimal changeover will bring U.S. markets into conformity with overseas markets, which will be an important benefit as globalization shrinks distances and erases borders. The decimalization project began on August 28, with seven NYSE and six Amex issues chosen because they represent a range of trading volume. All 4,860 Nasdaq stocks will switch to decimal trading between March 12 and April 9, the SEC s deadline.
Studies are already in the mill as to how the new system is affecting the trial stocks.
And competition between vendors of any kind, whether they re selling stocks or hamburgers, usually results in better prices for the public. A change we traders have already witnessed has occurred with lower stock prices on companies that will be directly impacted by the projected effect of narrower spreads. As you know, specialists and market makers profit from those spreads. I suspect a couple of situations will take place as this evolution in pricing proceeds. First, the narrowed spreads should benefit traders and investors.