NYSE Follows U.S. Trend To Quote Shares in Cents

WASHINGTON -- The New York Stock Exchange has announced that it will start trading stocks in dollars and cents by the year 2000.


Responding on Thursday to pressure from Congress and market pressure from other U.S. stock exchanges, the directors of the NYSE voted to scrap its 200-year old practice of quoting stocks in fractions, and instead move to pennies. Other U.S. exchanges are expected to adopt decimal prices as well.


Pricing stocks the way stores price bread and cheese will make it easier for investors to understand how much they pay and receive when trading stocks.


"If it doesn't happen I'll be so disappointed,'' said Jim Sullivan, 53, a retired stock broker in Ventura, California, who manages his own investments. "This would be really helpful to investors because they'll be able to understand price moves better.''


In one transaction Thursday, for example, Microsoft Corp. stock changed hands at 120-9/16 per share. In the future, investors won't have to do the calculating to translate that into $120.56.


A move to pennies would also transfer money -- as much as $3 billion a year, according to recent studies -- from the purses of Wall Street market makers to the pockets of investors.


That's because if stocks trade in increments of pennies, competition will force Wall Street dealers to bid slightly more when buying stock from investors, and ask for slightly less when selling.


Shares now trade in increments of eighths of a dollar, or 12.5 cents. The NYSE said that later this month it will allow stocks to trade in sixteenths, or 6.25-cent increments.


The Big Board, as the New York exchange is known in financial circles, did not say Thursday whether it ultimately will go to increments of a penny or a nickel. But congressional aides said they were told by representatives of the NYSE that the exchange will let competition among financial markets decide how small the price increments will be.


In response to the move by the NYSE, the Securities and Exchange Commission said that within 30 days it will host a meeting of all U.S. stock markets in Washington to coordinate the move to the decimal system.


The Nasdaq Stock Market, which rivals the New York exchange in trading volume, and the regional stock exchanges will have to adopt decimal pricing, according to market and congressional sources.